The Energy Loyalty Penalty: Why Long-Term Customers Pay the Most
Data indicates that millions of UK households may incur higher annual costs by remaining with their current energy suppliers. Customers who have not switched or reviewed their tariffs in over three years often remain on default or standard variable…
Data indicates that millions of UK households may incur higher annual costs by remaining with their current energy suppliers. Customers who have not switched or reviewed their tariffs in over three years often remain on default or standard variable rates, which are among the most expensive options.
According to Ofgem, approximately 60% of households have not changed suppliers since before the energy crisis of 2021-2022. Despite the return of new fixed and discounted dual fuel offers, many consumers believe the market has not reopened to competition.
Tim Bailey, Head of Partnerships at Free Price Compare, highlights that loyalty can result in significant hidden costs for household energy expenditures. Suppliers often maintain less competitive rates for customers who do not explore alternative options. Given that price caps fluctuate quarterly, even short periods of inaction can result in substantial overpayments.
During the crisis years, the energy market was largely inactive, with many suppliers withdrawing fixed-rate products and Ofgem advising consumers to remain with their current providers. However, as stability returns, the disparity between competitive and default tariffs is increasing.
Comparison platforms reveal that households on capped variable rates may pay £150 to £250 more annually compared to those who compare energy deals. For homes using both gas and electricity, the cost difference can be greater, especially when using separate suppliers for each fuel.
Bailey notes that dual fuel customers are particularly affected. Managing two accounts with different suppliers can double standing charges and eliminate bundle discounts, whereas consolidating fuels under one provider can save approximately £100 annually through reduced administrative and billing costs.
Data indicates that millions of UK households may incur higher annual costs by remaining with their current energy suppliers.
Dual fuel tariffs allow households to combine gas and electricity services with a single supplier, which can result in significant savings. Previously considered a convenience, these tariffs are now among the most competitive available.
Ofgem data indicates that the average combined standing charge exceeds £350 annually, regardless of usage. Many suppliers offer a single combined charge or bundle discounts that lower both rates for dual fuel tariffs.
The longer a household remains on an outdated tariff, the larger the loyalty penalty becomes. Although a price cap exists, older plans are often at the higher end of the price spectrum, while new deals are introduced at lower rates to attract proactive consumers.
Ofgem reports that households that switched regularly before the energy crisis saved an average of £200 annually compared to those that did not. This savings gap is returning as suppliers compete for new customers.
Consumers often believe that regulated suppliers under the cap offer uniform pricing, which is not accurate. The cap limits charges but does not set prices, allowing suppliers flexibility within the cap, reinforcing the importance of comparison shopping.
Behavioral experts cite "inertia" as a reason why consumers delay switching. Many assume that all tariffs are similar and thus do not actively seek alternatives. However, fixed deals are returning below capped rates, especially for direct debit and dual fuel customers.
Bailey points out that habit is a significant barrier, with many consumers not having compared or switched tariffs since before 2020. Online platforms like Free Price Compare offer quick and transparent processes to compare energy deals, allowing consumers to see potential savings and evaluate whether dual fuel options could lower their standing charges.
Energy prices are anticipated to remain volatile through early 2026, with Ofgem reviewing the cap quarterly. Consequently, remaining loyal to a single supplier may continue to be costly unless consumers regularly engage with the market.
Bailey concludes that those who frequently review their options, whether by switching suppliers, changing tariff types, or consolidating fuels, are more likely to manage their energy bills effectively. For UK households, the recommendation is clear: reviewing contracts and comparing tariffs can lead to more equitable energy costs.
Based on reporting by TechBullion.