The price of gas and electricity is unlikely to fall in the next few months for millions of households on their provider's standard tariff even though suppliers now pay less for the energy they sell to us, according to industry insiders. But those looking for a new deal can take advantage of a price war.
Wholesale energy prices – the price firms pay for the energy they sell to us – have fallen over the past few months, partially driven by a dramatic fall in the price of oil. A barrel of Brent Crude oil now costs just over $50, compared to more than $100 in the summer.
Energy experts say there is plenty of pressure on suppliers to reduce prices for customers on a standard tariff – which represent around 60% of energy customers – but they are more likely to continue to only reduce the cost for those signing up to new deals.
Energy firms are often accused of quickly raising prices when wholesale prices rise, but are slow when the boot is on the other foot.
Prices are only dropping for switchers – take advantage
While standard prices are static – at around £1,180 for someone on a standard dual fuel tariff with typical usage. We're seeing a host of new fixed deals being launched to attract switchers, some cutting costs by over £250 a year. Therefore, it's important everyone checks whether they can save:
- Do a top fixes comparison via the MSE Cheap Energy club (which also gives up to £30 cashback if you switch
- If possible, pay by monthly direct debit, just ensure you then give regular meter readings to keep it accurate
- Check whether you can cut your usage – see Free insulation, Green Deal, and Energy mythbusting.
Energy price predictions
No-one has a crystal ball, but here are the predictions made to MoneySavingExpert.com below – we'll start with our very own Martin Lewis.
Martin Lewis, founder and editor of MoneySavingExpert.com, says: "Wholesale prices (the price energy firms pay) have plummeted, yet I'd be surprised to see mainstream price cuts as 1) big firms buy ahead so it takes time to filter through and 2) providers don't want to cut prices now and lose the ability to put them up if Labour wins the election and puts a price freeze in place.
"So my guess (and it is only that) is that if any prices are cut, it'd be after the 7 May election.
"Meanwhile, we'll likely see more cheap fixes launched like those above for switchers. Yet I wouldn't hold out for prices to drop much further, as the gain from switching and saving during the winter months will likely outweigh any cuts."
Mark Todd, energy expert at Energyhelpline.com, says:
"Standard prices should drop by 5-10% given wholesale falls but they're unlikely to move until the summer. On market leading prices, I believe these will continue to decline in price, with the cheapest deals likely to drop. Smaller suppliers will lead the pack.
"In terms of new fixed deals, these will keep coming down. Obviously if you are on a fix your price won't change unless you switch as your current deal is fixed."
Peter Nisbet, risk management director at energy consultancy firm Utilyx, says:
"Mild weather, sluggish demand and robust supplies are adding pressure to put prices down. But with the election looming and threat of a possible price freeze, suppliers are unlikely to take any immediate action in our view."
Jason Wakeford, energy expert at uSwitch.com, says:
"The big six have not changed prices for their standard tariffs for about a year. We have been calling for the big six suppliers to urgently reduce these prices, given wholesale prices – which make up nearly half of bills – have been falling for a long time.
"I don't think we're likely to see any real changes to standard tariffs in the short-term, although these prices should be falling.
"We are seeing an influx of competitive, fixed deals coming on to the market at the moment. In fact, nine out of the 10 best deals are now for under £1,000 – which is more than at any time since 2012."
Stephen Murray, energy commercial manager at MoneySupermarket.com, says:
"Wholesale prices and oil prices have tumbled in 2014. Against this backdrop it is becoming increasingly difficult for suppliers to justify not reducing standard/variable prices.
"When wholesale and oil prices are coming down, in a normal market, we would expect to see price cuts, especially as these prices have been coming down for some time. But the fact that the election is coming and Labour's promised to freeze prices, it's creating nervousness."