Households that pay high standard tariffs for gas and electricity must automatically switch to a cheaper deal as the government tackles “scam” bills.
The Ministry of Business, Energy and Industrial Strategy (BEIS) announced on Friday that an automatic switching system would be tested in 2024. The program aims to eliminate the “loyalty penalty” in which long-time customers end up on the more expensive rates if they don’t act when their deal ends.
More Britons are looking for the cheapest fares, but Business Secretary Kwasi Kwarteng has said that “the existence of better deals on the market is not in itself enough to boost consumer behavior”.
The trial will involve households with expensive default energy tariffs switching to a better value plan, unless they choose to opt out. Ministers also hope it will mean more consumers switch to tariffs powered by renewable electricity.
The government said the energy price cap, introduced in 2019 to protect 15 million households on default tariffs, will also be extended. New legislation will allow the cap to continue beyond 2023 if necessary, meaning consumers who do not shop or opt out of any future automatic switching system would still be protected. The Warm Homes rebate program, which offers low-income households a rebate of £ 140 on their bills, would also be in effect until 2026, he said.
“An automatic switching system would ensure households get a fair deal, while the new price cap legislation will allow continued protection until we are satisfied the market is sufficiently competitive,” Kwarteng said.
An estimated 5.8 million households switched energy providers last year, realizing savings worth an average of £ 290, but research by regulator Ofgem suggests less than half of UK households regularly look for a better energy supply.
Citizens Advice said automatic switching would protect households from the “loyalty penalty”. The extension of the price cap was also essential and “particularly important at a time when many households face significant financial challenges resulting from the pandemic,” said its chief executive, Clare Moriarty.
However, energy price comparison site Uswitch.com warned that it would be difficult to help such a large and diverse group of customers with a single plan, given the huge changes in the energy market. alongside a wave of net zero goals. It was also a missed opportunity to help households that have the most difficulty paying their bills, according to its policy expert Justina Miltienyte.