Loyalty Trap Index: Bill inequality hits £42 per month during lockdown

Energy bill inequality, the difference in how much homes pay for using the same amount of gas and electricity, has reached £42 per month in May (£507 per year).

Our new research shows some households are now paying 74% more than others for using the same amount of energy each month.

A typical home in Oxford, the area with the most expensive standard variable tariffs, is paying £99 each month for its energy. However, a home in Edinburgh, the cheapest area, pays just £57 per month on the cheapest tariff for the same amount of energy.

The increase in energy bill inequality has been caused by two market trends:

  • A fall in wholesale energy prices which has widened the gap between the cheapest tariff and standard variable tariffs.
  • Higher energy use as people spend more time at home during the lockdown which means existing energy inequality has a greater impact.

The existing regional energy inequality means that even on the same standard variable tariff, a home in Oxford has to pay £69 more each year for energy compared to a home in Nottingham. If both homes switched to the cheapest tariffs available, an Oxford home would still have to pay £28 more per year than a home in Nottingham.

This price gap between the regions comes from energy suppliers passing on the cost of using different energy networks.

Energy bills are set to rise by £141 per year if COVID-19 leads to people continuing to work from home. A typical household will now pay £1,092 per year for their energy.

The higher energy use means people on a standard variable tariff from a big six suppliers will typically pay £1,156 per year – an increase of £148. However, a household on the cheapest tariff in their area will pay an average of £705 per year – a £94 increase.

Switching from a standard variable tariff to a cheaper deal could save £451 a year.

The most effective way to reduce energy inequality and save money on energy bills is to switch to a cheaper tariff. Households could typically save £451 per year or £38 per month if they switch from a standard variable tariff to the cheapest deal available.

In Edinburgh, people could save a massive £484 per year by switching. Even in Nottingham, where people could save the least by switching, people could still cut their bills by £417 per year by moving to the cheapest tariff.

Most suppliers also offer cheaper tariffs if you pay by Direct Debit. Currently, 27 energy suppliers offer direct debit tariffs – roughly 40 per cent of the market. People could be missing out if they don’t use Direct Debit to pay their energy bill. After switching, people should try to provide regular meter readings to ensure their Direct Debit is set at the right level, so they aren’t building up credit or debit in their account.

Charlie Quigley, co-founder of Youtility commented: “Thousands of consumers are paying far more than they need to for their gas and electricity each month. It’s not fair that some people face significantly more expensive bills than others for using the same amount of energy. We may all have to continue to spend more time at home due to social distancing measures which means this inequality will get worse. If you’re in a city such as Oxford or Bristol where wholesale energy prices are higher, it’s especially important to regularly review your energy bill and consider switching.”

Inequality in annual energy bills