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Desperate energy firms push deals that charge hundreds more than the price cap

·3-min read
a British Gas logo, as British Gas owner Centrica has hit out at a Government proposal to cap energy prices - PA
a British Gas logo, as British Gas owner Centrica has hit out at a Government proposal to cap energy prices - PA

Energy customers could be unwittingly locking themselves into contracts that cost hundreds of pounds more a year after providers removed default tariffs from their websites and hiked the cost of fixed-priced deals.

Experts said the move to hide cheaper offers protected by Government cap, and tie customers down to some of the most expensive energy contracts in history, was "very questionable" behaviour.

Customers move on to default prices, also known as standard variable tariffs, when their fixed-term contract ends. Standard rates have historically been more expensive but suppliers are capped on how much they can charge by Ofgem, the regulator.

Given the ongoing energy crisis, some providers have stopped listing standard tariffs on their websites and instead promoted new fixed-priced deals that last multiple years and cost hundreds of pounds more each year.

Homeowners looking to protect themselves from the market volatility by locking in prices could therefore unknowingly end up with a much higher bill than if they took no action at all.

Mike Foster of the Energy and Utilities Alliance, a trade body, said: “This behaviour leaves a great deal to be desired. Questions should be asked providers and the Government, that encouraged competition as the best way of keeping down bills."

The energy price cap will be £1,277 from October 1, rising £139 from the current level, but still substantially below some providers' fixed-priced deals. The cap only applies to a provider's SVT. It can charge any rate on fixed-priced deals that customers actively choose.

British Gas is promoting three deals, the most expensive of which costs £1,982 per year for a two-bedroom house in Surrey – £844 higher than the price cap. It also locks the household into the contract for one year.

Scottish Power also quoted three fixed tariffs, the most expensive of which was also £1,970, a one year contract with a £60 cancellation fee.

A Scottish Power spokesman said: “All energy suppliers in the UK have to offer existing customers an SVT tariff, which is subject to price cap changes made by Ofgem. While at current levels this does not cover the cost of supplying energy to SVT customers, it continues to be available to all existing Scottish Power customers.

“As has been widely reported in the last few days, wholesale energy prices have surged significantly in recent months. Like other suppliers, our fixed tariffs available to new customers need to cover these costs and reflect the market at the current time, which is exactly what they do.”

British Gas did not comment by the time of publication.

The issue is not limited to larger suppliers. For a four bedroom home in West London, on an electricity-only Economy 7 meter, So Energy quoted a fixed rate deal of £2,169 a year. A spokesman said: "This is not unique to So Energy, due to the unprecedented market-wide conditions we are seeing at the moment."

Outfox the Market quoted a fixed-term deal costing £2,235, some £1,097 more per year than the price cap. The firm could not be reached for comment.

Customers could potentially save money over the long run by locking into a higher priced deal, as the regulator's cap is reviewed every six months. Analysts at HSBC have warned that the rise in wholesale gas prices could push the cap up to £1,468 by February, a £192 increase.

However, it would have to climb £514 higher before any of the British Gas or Scottish Power's contacts saved customers money.

Energy firms have lobbied the Government to scrap the price cap, as many face collapse amid spiraling wholesale energy costs. Business Secretary Kwasi Kwarteng insisted the cap "will remain in place", assuring consumers that their bills would not rise as a result of the gas crisis.

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