UK households have forked out an extra £7.3 billion over the last five years by remaining customers of the Big Six energy firms, a new report shows.
Ofgem data compiled by energy provider Bulb found that families who held accounts with the biggest firms – including British Gas, SSE, E.ON, Npower, EDF and Scottish Power – for at least five years paid out an average £853 more than they needed to over the period
The report explained that while Big Six firms tend to offer cheaper fixed tariffs in order to “entice” new customers, those tariffs tend to expire within one to two years.
At that point customers are usually transferred to standard variable tariffs, which cost up to 30% more than their original plan.
The report went on to calculate the so-called “loyalty fee”, which measures the annual price difference between the average standard variable tariff at a Big Six firm compared to their cheapest tariff.
It found that the average loyalty fee for a UK household was £852.75 over five years – with an astonishing 8.5million British homes staying with one of the Big Six firms and not switching.
Bulb co-founder Hayden Wood said: “Loyalty towards a brand is often rewarded, yet households who’ve put their trust for years in a single energy company are being forced to subsidise others who switch every 12 months.”
He added: “These latest numbers show that so-called standard tariffs no longer have the customers’ best interests at heart. The Big Six need to show that they’re putting customers first, instead of profits.”
A recent poll by uSwitch found a third of Brits are already concerned about paying their energy bills this winter and more than half are struggling with their household finances.
British Gas became the latest Big Six energy supplier to hike prices at the start of August, when it confirmed that it was ramping up the cost of electricity by 12.5% for 3.1 million customers, despite falling wholesale prices.
The company had promised in December that it would freeze tariffs until summer 2017, while rivals including Scottish Power, E.ON and EDF raised their own bills near the start of the year.
Competitor SSE raised dual fuel prices by 6.9% in April, while Npower came under fire in February amid plans to hike gas and electricity prices by 9.8% – a move that added £109 to annual dual fuel bills.