Martin Lewis: The rise in the energy price cap next April will still be cheaper than any fixed deal

badmemory

samlad80 said:

Hi Martin and Gang,

i had a lovely email from British Gas today telling me to fix NOW!! To a wonderful tariff especially for people moved to them following an energy company collapse. 

The comparisons they have given me show that switching now will mean my bills rise on average £100 a month starting from the switch - yet they make out they are doing me a favour. 

Now, should I start paying more now or stay on the capped tariff until April, and in April - are they then going to offer me a horrendous tariff that’s even worse  

help!

I got that email too!  Still laughing.  After all it was only a 22.5% increase over the SVR.  Of course the next SVR could be an even bigger rise.  On the other hand......

jrawle

I am sure the energy companies will have done their own calculations - they probably have teams of people working on it - to figure out what the price cap is likely to be from April, probably more accurately than Martin & Co. They are not likely to offer fixed rate deals now that will result in costing them money over the term. They aren't charities. If they are promoting something heavily, they must think it will be to their advantage. Of course, there is a small chance their teams of experts' predictions could be wrong, but the odds are pretty long.

Regarding the old tariffs with the first n units charged at a higher rate, those used to be the "no standing charge" (NSC) tariffs. I once worked out that if you were an average or heavy user, it cost the same whether you were on NSC or standard as the higher initial unit cost equalled the standing charge. For low users, it was advantageous. I believe such tariffs were effectively banned some years ago when the government attempted to simplify the energy market, with each tariff only allowed a standing charge (which could be zero) and a single unit cost.

As for the confusing way prices are stated in terms of some mythical "average" household, this is again at the behest of the government, supposedly to make it easier to compare prices. I have always thought the only thing that should be stated are the actual unit costs and standing charge. The message should be driven home that the only way to accurately compare suppliers is to put your actual annual usage in kWh into a comparison site. It's dead easy to do, and the site will tell you what you can actually expect to pay. The "annual cost" nonsense that is always quoted should be scrapped, and really fixed direct debits do not help either as it's common to see people saying that's what they pay, or not understanding that they pay for what they use according to their meter.

Milton53

Similar experience with british gas. Current spend £2400 p.a. (OK - big house home all day) Contract ends this month. British Gas says i should definitely sign up to new contract now as even bigger costs after April 2022, Their recommended contract would be £4500 p.a.!!    nearly 90% increase. I'm staying with cap......

wittynamegoeshere

If you need a computer to compare prices then competition can not ever work effectively.  Suppliers like the fact that people can't compare tariffs, it means that they can baffle people into paying more.

Probably the best solution would be to require zero standing charge on all tariffs.  Then the unit rate would be simple and comparable between all tariffs and suppliers.  Obviously this would mean that those who consume more would pay more, but this ties in quite elegantly with our international commitments to reduce energy consumption.  At the present time, heavy users effectively get a discount for using more.

Energy companies could easily average the standing charge across all consumers, exactly as every normal business has to.  When I go to Tesco to buy one tin of beans I don't have to pay an entrance fee to get through the door.  They're possibly making a loss on my transaction after paying for the infrastructure and the wages of the person at the till, but they just take the rough with the smooth and adjust their prices so they make an overall profit, this is just how the real world works outside of the cosy pretend world of the fake energy market.

JJ_Egan

No standing charge was the norm . but first  xx unit rates where at a higher rate .

Though i agree that the standing charges can be transferred to unit costs .

wittynamegoeshere

I mean across all unit costs, not just the first however many.  One single unit cost would be the only thing you needed to know to compare.  Then little old ladies would be heard chatting, saying "Oh, you're paying Overpricety 19p a unit?  I'm only paying 17p to Cheapower."  In other words we'd actually have functioning competition, where people could actually understand how much they're paying and whether they're being conned or not.

QrizB

wittynamegoeshere said:

If you need a computer to compare prices then competition can not ever work effectively.

But you don't need a computer; you need a smartphone, or a pocket calculator, or a pen and the back of an envelope, or even a bit of careful mental arithmetic.

Any 16-year-old with a maths GCSE (or a CSE, or an O-level) is capable of doing it.

Astria

wittynamegoeshere said:

When I go to Tesco to buy one tin of beans I don't have to pay an entrance fee to get through the door.  They're possibly making a loss on my transaction after paying for the infrastructure and the wages of the person at the till, but they just take the rough with the smooth and adjust their prices so they make an overall profit, this is just how the real world works outside of the cosy pretend world of the fake energy market.

The till operators and other infrastructure in your example are/is being paid regardless of whether you are there or not, so the fact that you are only buying a tin of beans is still a benefit for them. They'll still make some profit from the sale and more than if you didn't go and they were effectively paying for nothing.

The same can be said about other things - think of line rental for example, you paid so much a month before any call charges. Mobile phones work in the same way unless you fancy the very high price of PAYG tariffs in comparison.

I agree there should be choice, but you shouldn't have a "One size fits all" approach. It doesn't take a lot approximate your usage for the year, add on the yearly standing charge and compare tariffs, you don't even need a calculator never mind a computer.

jrawle

wittynamegoeshere said:

If you need a computer to compare prices then competition can not ever work effectively.  Suppliers like the fact that people can't compare tariffs, it means that they can baffle people into paying more.

Probably the best solution would be to require zero standing charge on all tariffs.  Then the unit rate would be simple and comparable between all tariffs and suppliers.  Obviously this would mean that those who consume more would pay more, but this ties in quite elegantly with our international commitments to reduce energy consumption.  At the present time, heavy users effectively get a discount for using more.

Energy companies could easily average the standing charge across all consumers, exactly as every normal business has to.  When I go to Tesco to buy one tin of beans I don't have to pay an entrance fee to get through the door.  They're possibly making a loss on my transaction after paying for the infrastructure and the wages of the person at the till, but they just take the rough with the smooth and adjust their prices so they make an overall profit, this is just how the real world works outside of the cosy pretend world of the fake energy market.

How would you compare all the tariffs available without a computer? OK, there are fewer suppliers now than a few months ago, but there are typically dozens of tariffs available. Are you going to write to each supplier for a paper brochure to get the unit rate, then see which is the cheapest, then write or phone up to switch? It's still easier to ask a comparison site which can show you all the prices immediately.

While I'm not necessarily wanting to defend standing charges (which seem exorbitant at the moment) you have already pointed out why your Tesco beans analogy breaks down in your previous paragraph. The point is so that heavier users get a discount. As I said in my previous post, it used to be that NSC tariffs charged more for the first units, again so that heavier users paid less per unit overall. This is in fact exactly what supermarkets do. Buy a bigger tin of beans or box of washing powder or a large bottle of milk, and it's significantly cheaper per unit measure than buying a small one.

Scrap standing charges, and you will see a proliferation of tariffs "for large users only" with penalties if you don't use more than a certain number of kWh, or discounts applied for heavy users, or some other devices the suppliers will think up to make it even more complex. No doubt the comparison sites would update to take all of this into account for you if you are happy to use a computer.

wittynamegoeshere

I'm completely capable of comparing tariffs.  However, I'd say that it's probably a minority who are capable of doing this.  You've got to appreciate that the energy nerds who frequent an energy supplier forum are definitely not representative of the entire population.

We have elderly relatives who could be paying anything and are extremely reluctant to switch as they don't have a clue what they're paying or what others are offering.  They don't have a computer or smartphone.  They're definitely not alone, a huge chunk of the population just ignore it all as they can't be bothered with it.

I really don't see a problem with eliminating standing charges and just having a flat unit rate.  It might cost heavy users a bit more, but they're the ones who are polluting the planet and overloading the infrastructure.  If they didn't get their effective discount for heavy use then they could always spend on improving efficiency instead.

Suppliers wouldn't be able to offer different tariffs for heavy users, the unit rate would be their one and only variable.  Just like that price label on a tin of beans in fact.