From the start of 2014 until early 2016, the price difference between the average standard variable tariff and the cheapest tariff available in the market increased significantly. This is because the price of the cheapest tariffs fell at a much faster rate than that of the average standard variable tariff. The differential peaked in February 2016 at £350. Since then, and up to January 2017, the average SVT has continued to drop and the cheapest tariff in the market has increased, driven primarily by increases in wholesale prices.
Between February 2017 and December 2017 the cheapest tariff in the market has fluctuated, but returned to roughly the same level. Over the same period the cheapest tariff offered by the six large suppliers has increased by 5%, reaching £973.
The average price of SVTs offered by the six large suppliers has increased since February 2017 but was stable relative to the previous three months at £1,135 in December 2017. These SVT increases were the first for most of these suppliers since the end of 2013. The differential between the average price of the SVT offered by the six large suppliers and the cheapest tariff has generally shown an increasing trend since February 2017, but was also stable relative to the previous month at £308 in December.
For more details on the changes to SVT prices, please go to our chart Average tariff prices by supplier: Standard variable vs cheapest available tariffs (GB).
The differential between the basket of cheapest tariffs and the average standard variable tariff for the six large suppliers stood at £275 in December 2017, a decrease of 4% over the previous month.
Relevance and further information
Tariff differentials reflect pricing in different market segments, as well as how much other suppliers are able to compete on price with the six large suppliers.
We calculate the bill values associated with the different tariff types using a ‘typical medium domestic consumer’. As of October 2017, typical consumption values for a medium consumer are 12,000kWh/year for gas and 3,100kWh/year for electricity (profile class 1). The chart includes collective switching tariffs from Q1 2016. All tariffs shown in the chart are for a dual fuel, direct debit customer. Dual fuel refers to a situation where a customer takes gas and electricity from the same supplier.
A standard variable tariff refers to a supply contract which is for a period of an indefinite length and which does not contain a fixed term period that applies to any of the terms and conditions. It’s an energy supplier’s basic offer. If a customer does not choose a specific energy plan, for example after their fixed tariff ends, they will be moved on a standard variable tariff until they have chosen a new one. A customer can also make an active choice to select a standard variable tariff.
Tariffs with limited availability depending on customer features (for example, tariffs which are only available to new customers, also known as ‘acquisition’ tariffs, or tariffs restricted to certain regions) are excluded from the calculation to make sure that all tariffs considered are generally available to all customers across GB.
Tariffs available with white label suppliers are included in the calculation of the cheapest tariffs. White label suppliers are organisations without supply licences that partner with an active licensed supplier to offer gas and electricity using their own brand.
To calculate the average of the cheapest tariffs from the 10 cheapest suppliers we took the cheapest tariff offered by each supplier in the market (i.e. one tariff per supplier) and then ranked the tariffs in order of price. We then took the simple average of the 10 cheapest tariffs in this list. This method is to ensure a cross section of suppliers is included in the calculation.