Standard variable tariffs and fixed – gap expected to rise

The latest analysis from Cornwall Insight shows, that when the price cap rises to £1,254/year on the 1 April, the difference between the price cap and the cheapest standard variable tariffs will increase significantly. In addition, as all the larger suppliers have announced standard variable tariffs (SVT) rises in line with the increased cap from 1 April, the gap between the average cheapest tariff and these SVT deals will also expand.

The below graph illustrates the widening effect between the level of fixed tariffs and SVTs. It shows that while there has been a reduction in fixed tariffs, there also has been an increase in the most expensive SVTs.

Annual Average fixed and standard variable tariff costs by supplier type for new customers

Annual Average fixed and standard variable tariff costs by supplier type for new customers

 

Kate Hill, Senior Analyst at Cornwall Insight, said:

“The situation is just like the final weeks of 2018, where many suppliers moved their SVT to make sure they are compliant with the new cap. Anticipating the new April cap level some suppliers have increased their SVTs, with the end of February seeing all of the large suppliers announcing SVTs up to the new

“Although, some of the small to medium suppliers have also opted to increase their SVTs, the average SVT costs for the medium and small supplier group were lower at the end of February 2019 than at the end of December. Moreover, the average medium supplier fixed tariffs fell by 2% over the same period. This effect of larger suppliers increasing their SVTs and the downward pressure on fixed tariffs has caused the widening effect.

“Figures from Cornwall Insight show that when the cap was phased in on 1 January the gap between the cheapest average tariff type and large supplier SVT was £67/ year. The equivalent gap as suppliers prepare for the cap level from 1 April now stands at £187/year – a substantial £53 difference from January.

“Wholesale costs have been falling, and some suppliers have been quick to react to this by lowering their prices. However, much of the widening seen is due to lags in the wholesale cap formula, which are yet to capture recent market falls, indicating the complexities of the modelling Ofgem has had to do to make the cap work.”

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