Government to force the Big Six suppliers to fix energy prices

London, 15 March, 2017

Summary:  Perplexed by the energy price rises made by the Big Six energy suppliers, the government has planned to bring down the Standard Variable Tariffs to be in line with the fixed deals. Energy comparison experts suggest that this move would hamper the competition in the energy market and an eventual loss of cheaper tariffs for the customers.

Three of the Big Six suppliers have hiked energy prices by a considerable margin, almost more than or equal to 8%. This sudden rise in home energy prices came as a blow to the customers who are already facing heavy household bills, mainly due to the fall of the pound post Brexit and due to the price rise in all sectors. As millions of energy consumers are affected by the enormous price rise, the government has taken a decision to deal with the energy suppliers.

According to the latest reports, the government is planning to force the Big Six suppliers to set their standard tariffs to match their fixed deals. The decision would reduce the gap between the STV and the fixed deals and would help the energy consumers who do not involve in regular switching practices. However, experts suggest that it would minimise the profit gained by switching suppliers and so, would hamper competition.

The Theresa May government has threatened to take strict action on the Big Six energy suppliers as they are offering energy to 90% of the UK customers. As they affect a large mass of the energy consumers, their moves should result in the benefit of the customers. The Big Six suppliers came under scrutiny after the Npower and Scottish Power announced price rises. As a strong action, the government is planning to publish a Green Paper which would link the STV to the fixed deals, which are annually £300 cheaper that SVT.

This means that the SVTs would be just a small margin above the fixed deals so that those customers that do not budge from SVT can also enjoy the fair price deals. This move also made the tongues rolling as the insiders of the energy market suggested that the minimum price difference between SVT and fixed deals would reduce the rate of switching and reduce competition to a minimum level. The lack of competition would again work against the customers, so every step should be weighed strategically before applying.

Shay Ramani, the founder of FreePriceCompare.com, spoke on the topic by saying that “The government’s move to bring SVTs in line with the fixed deals would hamper competition and reduce the number of switches. As customers would be bound with the same supplier, the threat of losing customers would not remain as the reason for effective service. This would deteriorate the services of the energy provider as well as slow down the energy market which thrives on a healthy competition.”

To sum up, the government’s intention to tackle the price hike situation by pulling down the Standard Variable Tariff to be in line with the fixed deals, can upset the energy market. It would reduce the number of switches and the healthy competition, which exists right now. Experts suggest that the strategy may not work in the best benefit of the energy customers. 

 
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