- Almost half (48%) of bill payers believe the price cap has led to fewer deals in the market
- Four in 10 (41%) say they’d like to switch to a fixed deal, but options are too limited
- One in three (34%) no longer shop around because prices are capped
As Ofgem announces that the Energy Price cap will fall to £1,690 from April 2024[1], KPMG UK’s latest research demonstrates the impact the price cap has had on consumers’ options for switching.
The survey of 1,700 bill payers carried out by YouGov during February 2024, found there was widespread awareness of the price cap. When asked, 84% of bill payers said they were aware of the energy price cap, and of them 87% correctly understood its purpose. However, the research indicates that consumer choice is where the biggest impact is perceived to being felt.
Almost half (48%) of all bill payers agreed that the price cap had led to fewer options to get a better deal on their energy, despite more energy suppliers starting to offer fixed price deals below the price cap[2].
Only one in four (25%) bill payers shopped around for a new energy supplier or tariff in the past twelve months, despite 41% saying they would like to switch to a fixed deal but are limited by the options available. Four in 10 of bill payers (42%) agree that the price cap has reduced competition in the energy market, while one in three (34%) admitted to not shopping around anymore as prices are capped.
While almost two thirds of respondents (62%) say they were in favour of the price cap when it was introduced in 2019, only a third (35%) agree that the cap has had a positive impact on energy prices in the following five years, and less than that (28%) believe it has been effective in limiting supplier profits. Separate research[3] concluded that the price cap, and the Government’s Energy Price Guarantee, did protect consumers through the peak of energy prices following Russia’s invasion of Ukraine.
Despite this, consumers were most in favour of maintaining the price cap (39%) when considering the key priorities for improving the energy market, with increasing competition (36%) and increasing investment in green energy solutions (28%), completing the top three responses.
Simon Virley CB, Vice Chair and Head of Energy and Natural Resources at KPMG in the UK commented: “Five years after introducing a cap on energy prices, and following two years of record high energy prices, consumer appetite for switching suppliers seems to be severely dampened by a perceived lack of deals in the market. With prices now falling rather than rising, hopefully this will spark a new range of fixed price deals.
“The price cap was always intended to be a temporary measure to protect ‘sticky' customers, while the energy market was reformed. But this protection appears to have come at some cost in terms of limiting choice and stifling innovation. We now need a national conversation about the future of our retail energy market – one that balances appropriate consumer protection with incentives for investment and innovation in a smarter energy system that benefits all consumers.”
