Energy News

Ofgem to overhaul energy market but Brits rush to fix prices

Thursday 23 June, 2011

By Martin Fagan - news@consumerchoices.co.uk

Even though regulator says it will “get tough” with energy companies, 59% of Brits have opted for a fixed-price deal.

Scottish Power’s decision to hike energy prices and fears other big energy companies will shortly follow suit has triggered a surge in consumers taking out fixing energy deals.

This comes on the same day energy regulator Ofgem announced it was going ahead with a radical overhaul of the retail gas and electricity markets.

Plans include simplifying and reducing the bewildering array of price tariffs and forcing the “big six” to sell off between 10% and 20% of their electricity output to allow smaller firms to enter the market.

“Ofgem has a major job on its hands,” said Mike O’Connor, chief executive of energy watchdog, Consumer Focus.

“Suppliers may be coming around to the need for reform but still seem to be in denial about the scale of change needed.”

But consumers have shown they have little confidence that Ofgem’s plans will result in lower prices and have voted with their feet by signing up to fixed-price energy deals.

Fears that other suppliers could follow Scottish Power and increase bills by 15% has already seen 59% of households switching energy deals and opting for the security of a fixed-price plan, according to uSwitch.com.

If suppliers hike prices by 10%, the average standard plan customer will see bills creep up to £1,244, while fixed-rate customers will still be paying £1,089 a year - £155 or 12% less, says uSwitch.

But if prices shoot up by 20%, while fixed-rate customers will still be paying £1,089 a year, the average standard plan customer’s bill will hit £1,357 a year, an increase of £268 or 24.6%.

Mike O’Connor from Consumer Focus added: “For consumers, energy is the least well-regarded market across the economy. The basics of a good, competitive market are lacking. That’s why Ofgem has to take the suppliers back to school to relearn the ABCs of treating consumers fairly.”