Households stuck on a Big Six standard variable tariff have wasted as much as £786 over the past three years, new research suggests.
Since 2014, the gap between the cheapest deals and these default tariffs adds an eye-watering £262 to dual fuel energy bills each year, according to figures from small supplier, First Utility.
Families can often find themselves overpaying on these standard deals without realising, as suppliers automatically move out-of contract customers onto these generally more expensive tariffs when a fixed deal ends.
Energy bills: Are you wasting hundreds on provider’s default tariffs?
As well as paying a higher rate per unit of electricity or gas used, households who fail to switch out once rolled onto standard tariffs are vulnerable to price hikes.
Over recent months five of the Big Six suppliers – EDF, Npower, E.on, Scottish Power and SSE – have all announced inflation-busting price hikes for standard variable rate customers.
Customers of smaller suppliers, First Utility and Co-operative Energy, will also see their bills rise from next month.
Despite increased competition thanks to a wave of smaller suppliers entering the market over recent years, 85 per cent of homes in the UK are signed up to one of the Big Six suppliers, according to research.
As many as 70 per cent of the customers with EDF, Npower, E.on,British Gas, Scottish Power and SSE are currently languishing on these more expensive standard variable tariffs, according to figures from the Competition and Markets Authority.
Over half of these households (55 per cent) haven’t switched tariff for at least 3 years.
The difference between the average dual fuel standard variable tariff and the cheapest widely-available contract between 2014 and 2016 was £262.
This adds up to a a difference of £786 for the average household over the past three years.
According to First Utility, the collective £7 billion this has added to energy bills across the UK is enough to pay for three months grocery shopping for 9 million families.
Left in the cold: Customers on standard tariffs pay more per unit of gas and electricity they use
While the perceived hassle of switching puts many customers of shopping for a cheaper deal, many may be in the dark about what they could be saving, particularly if they only receive paper bills every quarter.
Ed Kamm, UK managing director at First Utility said: ‘The Big Six have been exploiting customers’ loyalty for too long and it has to end.
‘The brutal truth, hidden away in the CMA report, proves that the Big Six have been relying on their standard variable tariff customers for years to bolster their profits. We have to see real change in 2017, with the onus on helping those who have been kept on bad deals for years and years.’
Today, a parliamentary debate will discuss the fact that MP’s ‘deplore the Big Six energy firms’ treatment of out-of-contract energy customers on default tariffs’.
The motion supported by 50 MPs across all parties, will consider ways to protect consumers on these out-of-contract deals as they believe pushing households to switch won’t fix the problem quickly enough.
It is also calling for industry, regulators and the Government to consider solutions that take into account how that the average consumer may not realise the importance of switching or think they have time to do it.
The best and worst regions revealed
Based on official population data from the Office for National Statistics, First Utility has worked out the total amounts households in each region have overspent on their energy over the past three years.
Collectively the East has wasted the most, at just over £885 million, followed by the South of England and the East Midlands.
However, households in the West Midlands and North West could have save the most by switching to a cheaper tariff.
Families in both regions on their provider’s most expensive deals, paid an average £809 more than they would have been charged on a market-beating deal over three years.