Before I came to this country, I was accustomed to a single electricity utility who held all the power. Pun, intended, the utility could switch you off, make huge mistakes on your bills (which you had to pay regardless), and make you queue to pay your bill in person. Not to mention the regular power cuts (many contemplative evenings in the dark gazing at an awe-inspiring, star filled sky).
When I had to choose our first UK energy supplier and tariff, I was confused. Tariffs had names (xOctv1, or SVR etc), and came with quotes that were annualised budgets. It took effort to figure out what the cost of each unit of electricity (or dual fuel, gas) we were signing up to. Reading up on this, I understood the difference between standard variable rate (SVR) and a named tariff (effectively, a fixed price for a period of time). Price comparison sites were great, but all showed headline annual figures, which did not tell me what I was actually paying. However, the information was there if you were willing to keep clicking down – peeling the layers, I was able to compare specific tariffs per kwh along with daily standing (i.e. we pay anyway) charges. We could choose a supplier and billing arrangement, and within a few weeks after account was set up in our name, this ‘chosen’ supplier would energise our homes at an agreed price! The previous supplier to the premises just had to be given a meter reading and balances transferred between suppliers.
This was a welcome change to what I was used to! Coming from a part of the world where prices rise regularly (I’ve lived through hyperinflation, which is another story), I found the prospect of fixing a price for a period of time very appealing. And while I don’t know what life was like before internet and price comparison, the information was now readily available at fingertips to make a reasonably informed choice. Every year for more than a decade, I have been able to fix a better price than the SVR and stick to budget on energy. Not being an expert on energy markets, I stuck to 12 to 24 month tariffs, despite seeing slightly longer offerings. Over time, usage has become more predictable so bills have not been a surprise unless an appliance has malfunctioned and decided to keep running!
Suppliers are regulated in how they charge us and the rules for supply etc, so I thought the UK is a really well regulated market. Suppliers were able to offer me green tariffs and renewable energy minimums! Until I started seeing news of the low winds across Europe and a rise in demand for gas. Prices were rising with my current fixed tariff only renewing in September, I was worried we might pay more next time around. So I’ve started looking at tariffs available, while also paying attention to consumer energy comparison sites and a famous TV show presenter on the topic.
I learned of the origin of the ‘price cap’ – effectively the regulators attempt to discourage the practice of supplier loyalty ‘premium’ to subsidize new customer offers at the expense of existing customers. Recent energy supplier failures (along with predictions of many more soon) revealed that there does not seem to have been a requirement to match supply and demand. So effectively, suppliers could put us on a fixed or variable price contract, without having secured its own supply. And if a material proportion of the industry’s supply is unpredictable (i.e. wind, sun, hydro), then adequate storage (i.e. gas reserves) are needed.
Tariffs on the market now suggest we’re going to be paying between 33%-50% higher prices soon. I could regret it later, but I plan to fix our rate for as long as I can – heading into the winter, gas prices can only go up and all the energy pundits have raised the concern that UK has little functioning gas storage. I regret being complacent before the summer, when prices were more favourable. Having calculated the lesser impact of an early exit fee, I realised too late that in future, I have to be more vigilant.
What continues to amaze me is that on all the consumer sites and on tv discussion, no one (including the regulator), is suggesting people fix a tariff. And for those on prepaid meters, surely the regulator could ask energy companies (who have years of usage data) to offer some sort of semi-fixed price?
One has to wonder whether the regulators and those in charge of energy policy understand how retail energy regulation fits in the value chain of global energy markets?