Britain’s energy suppliers will renew competition to attract customers as government subsidies are withdrawn, potentially triggering millions of households to switch provider in search of a cheaper deal.
(Bloomberg) — Britain’s energy suppliers will renew competition to attract customers as government subsidies are withdrawn, potentially triggering millions of households to switch provider in search of a cheaper deal.
Switching rates could jump if the government withdraws some energy support by lifting its cap in April by £500 ($605) to £3,000 a year, according to consultancy Cornwall Insight. Such an increase is likely to put some companies in a position to offer tariffs below the government cap, providing price differentiation in a market that’s been stagnant for over a year.
“I imagine households will be a lot more savvy about looking for the best deal now,” said Tony Jordan, a consultant at Auxilione. “In the back of their minds, they may still have worries about company collapses and stability.”
An escalation in switching could threaten to destabilize some companies, after about 30 energy suppliers collapsed since the summer of 2021 amid extreme market volatility. However, some of that risk will be moderated by Ofgem’s stabilization charge, which compels companies receiving new customers to partly compensate the previous supplier, which will have bought energy in advance for that household at a higher rate.
That charge is also likely to moderate the deals new suppliers can offer and it could come under more scrutiny if wholesale prices drop even further this year and it gets triggered more frequently, Cornwall Insight said. Switching rates fell to just 85,000 customers per month in 2022, a fifth of the rate three years earlier.
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