Households paying expensive standard tariffs for gas and electricity are to be automatically moved on to a cheaper deal as the government moves to tackle “rip off” bills.
The Department for Business, Energy and Industrial Strategy (BEIS) said on Friday that an automatic switching system would be trialled in 2024. The scheme is intended to eliminate the “loyalty penalty” in which longstanding customers end up on the most expensive tariffs if they fail to act when their deal ends.
More Britons are shopping around for the cheapest tariffs, but the business secretary, Kwasi Kwarteng, said the “existence of better deals on the market is not sufficient in itself to drive consumer behaviour”.
The trial will involve households on expensive default energy tariffs being switched 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 the 15m households on default tariffs, would also be extended. New legislation will enable the cap to continue beyond 2023 if needed, meaning consumers who do not shop around or opt out of any future automatic switching system would still be shielded. The warm home discount scheme, which gives low-income households a £140 discount on their bill, would also run until 2026, it said.
“An automatic switching system would ensure households get a fair deal, while new price cap legislation will enable continued protection until we’re confident the market is sufficiently competitive,” Kwarteng said.
An estimated 5.8m households switched energy supplier last year, making savings worth an average of £290, but research by the regulator Ofgem suggests less than half of UK households regularly shop around for a better energy deal.
Citizens Advice said automatic switching would protect households from the “loyalty penalty”. The extension of the price cap was also essential and “especially important at a time when many households face significant financial challenges resulting from the pandemic,” its chief executive, Clare Moriarty, said.
However, the energy price comparison site Uswitch.com cautioned that it would be difficult to help such a large and varied group of customers with one plan, given the huge changes in the energy market alongside a wave of net zero targets. It was also a missed opportunity to help the households struggling the most to pay their bills, according to its policy expert Justina Miltienyte.