Households could FINALLY see the return of cheaper fixed energy tariffs as Ofgem confirms it will scrap policy propping up high prices

Households could finally see the return of cheaper fixed-rate energy tariffs after Ofgem confirmed it will scrap a policy that props up high prices.

Today, the energy watchdog said it will end the Market Stabilisation Charge from 31 March 2024. 

The MSC means no energy firm is likely to bring out deals that seriously undercut their rivals, as doing so would mean they have to compensate the firm losing a customer if wholesale energy prices fall.

Ofgem said the end of the MSC ‘is evidence of stability and will help competition return to the market’. It was brought into play in April 2022.

Boiling point: The Market Stabilisation Charge has come under fire from industry experts as a policy that was deliberately blocking cheaper energy deals from the market

The MSC is one of the reasons millions of households have been unable to find cheaper energy bills and have been stuck on variable-rate tariffs regulated by the Ofgem price cap, which averages £1,834 a year. 

The point of the MSC was to protect energy firms from collapse by barring one firm from drastically undercutting the others at a point when the energy market was in crisis. 

A second Ofgem policy, the Ban on Acquisition Tariffs (BAT), is also preventing customers from finding cheaper energy deals. 

The BAT stops suppliers offering cheaper deals to new customers unless they offer these prices to their current customers as well.

Fixed-rate tariffs largely vanished after October 2021, when energy prices began to rise.

Although energy firms are now offering a limited number of fixed-rate tariffs, only one works out cheaper than staying on the price cap. 

Additionally, many fixed rate deals come with expensive exit fees of up to £300, punishing households that might want to move away. 

However, households may still be able to save money by taking out more than one energy deal, or by being offered a private fixed rate by their existing energy firm that is cheaper than they are paying now. 

Like the MSC, Ofgem brought this policy in in April 2022 to stop one energy firm drastically undercutting its rivals at a time of great turmoil for energy firms.

However, in the short term consumers may see energy bills rise by an average of £17 a year, as Ofgem is considering tweaking how it sets its price cap. 

The energy regulator is planning to do this to prevent energy firms going bust or leaving the market due to a record £2.6billion of customer debt. 

How can I tell if a fixed rate deal is a good one?

To work out if an energy deal is cheaper than you are paying now, compare the unit rate and standing charge with what you currently pay. These rates should be included on your bills.

The average home is paying rates limited by the Ofgem price cap, which means 53p a day in electricity standing charges and 30p for gas, while electricity unit rates are 27p per kilowatt-hour (kWh) and 7p/kWh for gas.

The massive variable is what happens with the Ofgem price cap in the future. It might be possible to lock into a cheaper deal now, only to see the price cap fall significantly, leaving you overpaying.

It is also worth looking at any exit fees in case you need to leave a deal early.

What is the future for energy bills?

Ofgem does not make predictions about how the price cap will change in the future, although chief executive Jonathan Brearley has previously warned customers that he ‘can’t offer any certainty that things will ease this winter’.

However, analysts at Cornwall Insight makes energy bill price predictions that are normally very accurate.

Cornwall Insight thinks the typical household will pay £2,032 from January 1, falling to £1,964 in April, £1,917 in July and then rising again to £1,974 next October.

This post first appeared on Dailymail.co.uk