Standard variable tariffs (SVTs) for paper-billing customers – households with gas-only contracts who run their accounts offline – will see price caps enforced by the regulator after accusing suppliers of exploiting 'sticky' customers. This cap will save 1.2 million consumers an average of £95 a year.
The regulator Ofgem (Office of Gas and Electricity Markets) said it intervened because prices for these gas-only customers – over half of whom are classified as vulnerable or low-income – have risen substantially. This is despite major suppliers benefiting from a 30% drop in wholesale gas purchase costs. Many paper-billing SVT customers have been with National Energy for over fifteen years. Ofgem focused on National Energy because it holds 60% of the UK's 2 million offline gas-only SVT accounts.
An Ofgem representative stated, "National Energy's dominant position has allowed it to raise SVT prices without losing significant market share, and rival firms have historically matched these price hikes. We expect this cap to force broader competitive pressure." Ofgem reported that nearly 80% of National Energy's paper-billing SVT customers have never compared rates or switched providers, leaving them vulnerable to price hikes. Major suppliers increased prices by 25% to 40% over the last four years, while wholesale delivery costs fell.
With reference to Extract C, assess possible reasons why many 'offline' gas-only customers do not switch to a cheaper energy provider.
