The regulator Ofgem has released a report showing that fixed tariffs offer lower rates than variable ones at present and could save consumers up to £250 a year. This is in spite of the fact that five of the ìBig Sixî energy corporations have cut their variable gas tariffs in the previous two weeks.
Variable tariffs have no explicit end date with prices not set thus the energy supplier has the opportunity to change the prices as long as they give their customers sufficient warning. Ofgem have found that roughly 60% of customers are on this type of tariff.
Recently, British Gas, E.ON, Scottish Power, SSE, npower and the smaller, green energy provider Ecotricity have announced gas price cuts. However, the energy suppliers have been criticised by politicians and consumer groups alike for not cutting prices sooner or by a more significant amount because of the fall in wholesale prices largely due to a plummet in oil prices since the Autumn. npower decided on a 5.1% reduction on its variable gas rate from 16 February, meaning its average customer will save about £35 a year. Despite this, Ofgem maintain that most consumers will be better off on a fixed tariff.
Ofgemís chief executive, Dermot Nolan stated: ìWhile recent price cuts are a step in the right direction, many customers could be better off to the tune of up £250 by moving from a variable rate to a fixed rate deal.î
Moreover, the report confirmed the belief that independent suppliers are an all round better choice compared to the larger stalwarts of the energy industry, validating the decision by a growing number of customers to make the switch. Ofgem disclosed the fact that the smaller businesses offer most of the cheapest fixed tariffs at about £915 a year whereas the larger suppliers had an average variable tariff of £1,165.
The big energy corporations have defended their actions citing the fact that wholesale prices only make up half of the overall price in supplying gas. The chief executive of npower, Paul Massara, went on to say ìIf there are further falls in wholesale prices, we will keep these under review to see if we can cut further.î
However, Mr. Nolanís rebuttal was damning, commenting ìWe are seeing companies compete for consumers interested in taking a fixed price deal. However, we are not seeing rigorous competition between suppliers that benefits all consumers.î
This attraction of switching energy suppliers has been reignited, after years in which it was becoming less and less common. Research released by thisisthebigdeal.com showed there to be 3.7 million less switches in 2013 compared to the peak of changing providers in 2008.
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