Don’t be fooled by the apparent generosity of the energy companies that have frozen the price of gas and electricity until at least the end of the winter.
Their marketing people are earning their money with their full page advertisements published on the coldest days so far of this winter telling us that they are not putting prices up. What the ads did not tell us is that the companies bought their gas electricity in the wholesale markets when prices were much cheaper. And they are only freezing their already very expensive standard variable rates.
They are not however freezing the prices on their cheaper fixed rate tariffs. These are costing £200-£300 more for people coming to the end of one and two year fixes.
Big six energy companies do not share their good fortune
The Big Six energy companies have muscle when it comes to buying in the wholesale markets and often can buy from associated companies. But they have not always shared their good fortune with customers. The smaller newcomers to the energy market have given them a run for their money and attracted hundreds of thousands of customers from their bigger competitors by buying cheap and passing on the savings to customers with fixed rates that topped the price comparison websites.
Now that wholesale rates are increasing along with oil prices the smaller companies are not so competitive and one GB Energy has gone bust. It serves the Big Six well, but anyone with a smaller supplier need not worry about their energy company going bust. Their supply will be safeguarded by the regulator, Ofgem.
There are likely to be cheaper tariffs available
But if they were on a super cheap fixed rate tariff they are likely to find themselves on an expensive standard variable rate. It may not increase during the winter, but there are likely to be cheaper tariffs available.
Customers have to be careful, though, as any comparisons they receive from energy companies may give an impression that they will do better with the new tariffs being offered. The way these are calculated can make the savings look a lot more than they really are.
Energy companies make the stats say what they want them to
The companies are pretty expert at making stats say what they want them to. When it comes to explaining how much profit they make from customers they use their lowest tariffs, not the expensive ones on which they make three, four or five times as much profit.
The chancellor wants energy prices to be fair for all. Let’s hope that any Government inquiry is not fooled by the current “generosity” or the industry calculations .