Customers who signed up for fixed energy tariffs within the past two years are now facing steep price increases as those fixed tariffs expire, and they must switch to supplier standard variable tariffs. With no new fixed tariffs available on the market, we've analysed the range of price increases that fixed tariff customers are likely to experience. Our analysis looks at dual fuel, direct debit tariffs expiring from 2022 onwards.
Around 1 in 6 customers are on fixed tariffs, and while many have been protected from price rises over the past year, many will now face higher costs as their tariffs expire and they're forced to switch to standard variable tariffs, which the government currently limits to an average cost of £2,500 under its Energy Price Guarantee (EPG).
Figure 1 shows the number of tariffs expiring and the average annual cost of those tariffs by their end date. There are a significant number of tariffs expiring in 2022-2023 for customers on 12- or 24-month fixed term contracts, with the number of these tariffs decreasing towards the end of the year, resulting from fixed tariffs being removed from the market in the second half of 2022. On average, customers will see an increase in annual cost of over £600 as their contracts end.
Figure 2 illustrates the difference in annual cost for tariffs expiring in the first six months of 2023. Customers on tariffs that started in 2021 will experience the greatest increase in cost. Fixed tariffs are also subject to EPG rate limits, meaning they are discounted to near the average annual cost of £2,500 in most cases. Therefore, the cost reductions in Figure 2 for high-priced tariffs starting in 2022 are not likely to be effective.
This analysis is limited to tariffs available on the market and does not account for the number of customers on these tariffs. However, it does highlight the risk of many households facing significant increases in energy costs that may be difficult to manage.
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