Energy Price Cap Extended to 2023 and Energy Bill loyalty penalties to be tackled pledges UK Government
The British Government has pledged to address the energy bill ‘loyalty penalty’ which sees energy suppliers placing their long-standing customers onto the most expensive tariffs once their cheap, introductory deal ends.
Punished for being loyal
The loyalty penalty has been seen as an issue by consumer groups for a long time and calls for companies that do it to be punished have been growing louder in recent years. The loyalty penalty effectively punishes a customer who has stayed with a supplier for a long time.
Of course, companies can always argue that the best way to avoid being hit by such a penalty would be for consumers to switch their supplier every year, however, most consumers do not do this, and this is something companies know.
According to research carried out by the energy regulator Ofgem, under half of the nation’s households regularly look into whether there are cheaper energy deals available to them. This means there is a massive number of people who then get hit by the loyalty penalty.
Energy suppliers who want to garner a reputation for excellence when it comes to customer service should stay in regular communication with their customers and warn them when their tariff is about to end. By doing this they will win the loyalty of the customer who will then be far more likely to stick with the supplier due to its honesty and support.
Also read: How to Improve Consumer Trust in Energy Suppliers?
What measures are being proposed?
The government announced several measures aimed at tackling the issue with perhaps the most ambitious one being the trial of an automatic switching service. The service would move consumers to cheaper tariffs when their current deal ends.
“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.
“In another move to better protect the most vulnerable energy consumers, the government is also extending the Warm Home Discount Scheme, which will knock £150 off the electricity bills of many pensioners and low-income families, until 2026 – supporting an extra 750,000 consumers. A total of three million households will now benefit from the scheme,” said Business and Energy Secretary Kwasi Kwarteng.
An extension of the energy price cap which was designed to cap the maximum cost of energy prices until 2023 was one of the ideas suggested, although that option is unlikely to prove popular with energy suppliers.
A consultation to explore other ways to help households find cheaper deals were also launched.
Also read: How to convince consumers to switch to a smaller energy supplier
Unleashing a wave of competition
The Business and Energy Secretary said, “We want to unleash a wave of competition within the energy market and keep energy bills low so households across the UK can keep more money in their back pockets.
Although more of us are now shopping around for the cheapest tariffs, the existence of better deals on the market is not sufficient in itself to drive consumer behaviour. That’s why we will make the switching process even easier so we can tackle the ‘loyalty penalty’ and ensure everyone pays a fair price for powering their homes.”
Competition in the energy supply sector is fierce already but the proposed plans for automatic switching will likely see suppliers having to up their game to attract new customers. Offering cheap tariffs is no longer enough, excellent customer service needs to be a priority too as does the growing shift towards proving a business is environmentally friendly.
If you’d like to enter the UK energy market, get in touch! Dyball Associates team of energy market consultants can guide you through the steps to get qualified and attain your gas or electricity licence.
Whether you’re looking for electricity and gas systems or support on starting an energy supply company, Dyball Associates can help.
Also read: Why are Challenger Energy Suppliers growing in popularity and how can they stay competitive?
Further Reading
Ecotricity makes bid for Good Energy official, but takeover is unanimously rejected
Green Energy Suppliers object the prospect of adding a surcharge to household energy bills
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