An annual report compiled by the Office of Gas and Electricity Markets (Ofgem) has been published recently to give consumers an indication of what is currently happening within the utility industry and what they should expect in the future.

The aim is to contribute to the debate by providing rigorous analysis of the current state of energy markets, and the outcomes they achieve. Ofgem regulates Britain's gas and electricity markets to protect the interests of current and future consumers. From an Oftem perspective the aim through its regulation is to deliver five outcomes for consumers. These are:

• Lower bills than would otherwise have been the case.

• Reduced environmental damage, both now and in the future.

• Improved reliability and safety.

• Better quality of service, appropriate for an essential service.

• Benefits for society as a whole, including support for those struggling to pay their bills.

British households and businesses spend around £50 billion on energy each year and their experience of the energy market is mainly via its retail side. This is where trends elsewhere in the market will have their most immediate effects on consumers. For example, disruptive business models and innovative technologies, combined with environmental policies, are shaping the energy sector and feeding into consumers’ energy bills.

Research shows that competition has brought more choice than ever before to active consumers, while the less engaged are still on more expensive default tariffs. Here are some of the relevant numbers:

73 The number of active licensed suppliers in June 2018 (60 last year).

£320 The approximate amount consumers on a Standard Variable Tariff could save by switching to the cheapest tariff in the market (£300 last year).

54 per cent The proportion of consumers on a default tariff, not including prepayments meter tariffs (57 per cent last year).

A standard variable tariff, or SVT, is an energy supplier's 'default' tariff. This is also known as ‘Out of Contract’ or ‘Deemed Rates’. The costs are variable, so the rate you pay can go up or down depending on wholesale energy costs. If you're on a fixed tariff and your deal ends, you'll most likely be rolled automatically on to your supplier's SVT if you do nothing.

As of September 2017, around 57 per cent of people with the 10 largest suppliers – around 13 million customers – are on non-price-protected SVTs. Consumers have been overpaying the big six energy firms by an estimated £1.4 billion a year* 

The three largest suppliers in the domestic gas and electricity markets – SSE, British Gas and E.ON –  have the highest, respectively 71 per cent, 67 per cent and 61 per cent. Only three suppliers have around or below 35 per cent.

Taking into account the above facts and statistics, now is undoubtedly a good time to become more actively involved in managing utility spend for any consumers who are not already doing so.

*According to the Competition and Markets Authority

Further information

Contact Savills Energy & Infrastructure