There are now just eight energy tariffs on the market that cost less than £1,000 a year, compared to 77 in January 2018, research from Which? reveals.
The consumer champion said the number of cheap energy deals has plummeted by 90 per cent in a year ahead of the introduction of the price cap.
Which? said the analysis lends weight to concerns that “energy suppliers may reduce the number of cheapest deals on the market to make up for money they might lose on their more expensive default tariffs” after the cap comes into force on 1 January.
Ofgem has set the cap at £1,137 per year for a medium domestic dual-fuel customer paying by direct debit. It estimates such households will save £75 a year on average, although it will only apply to default tariffs (usually variable) rather than fixed deals.
British Gas owner Centrica is seeking a judicial review against Ofgem over how the regulator calculated wholesale costs when it set the level of the incoming energy price cap.
Consumers could end up being “deprived of a choice of good-value deals” and may be less inclined to shop around if the savings from switching are lower in the future, Which? has warned.
The regulator predicted in its statutory consultation default tariff cap overview document that the price cap could cause a reduction of up to 50 per cent in the number of customers switching. This is something Which? has previously highlighted as a risk.
“The energy cap can only be a temporary fix, designed to rein in the worst excesses of the broken energy market,” Which? suggested.
It said the cap must be accompanied by a drive to engage consumers, while suppliers must look for innovative ways to give their customers a better deal and improve customer service.
Which? has called on Ofgem to “closely monitor” and report on how the cap affects cheaper deals on the market to ensure that customers will still be incentivised to switch and save money.
Alex Neill, Which? managing director of home products and services, said: “The price cap is supposed to help consumers, so it is a real cause for concern that some of the best-value deals seem to have disappeared from the market just as it is introduced.
“This demonstrates why the cap can only be a temporary fix – what is now needed is real reform to promote competition, innovation and improved customer service in the broken energy market.”
An Ofgem spokesperson said:“The energy price cap will stop customers on default tariffs, including some of the most vulnerable consumers, from being overcharged as much as £1 billion by their energy suppliers from 1 January.
“Our design of the price cap means it still pays to switch to cheaper fixed deals. While the price cap is in effect we are also working on a range of changes to the market that will help improve competition and potentially drive down prices for more consumers, including switching within one working day.”
A spokesperson for Energy UK, added: “Suppliers across the market are facing a significant challenge with rising wholesale costs which have risen by at least 30 per cent in the past year, as well as the forthcoming price cap – which, like Which? we have warned could have unintended consequences for consumers, including damaging choice and competition for customers.
“With the winter months ahead, we’d encourage everyone to make sure they’re on the best energy deal for them – by either getting in touch with their existing supplier or shopping around. And, with the Energy Switch Guarantee in place, consumers should also feel confident that switching will be simple, speedy and safe.
“Our most recent switching figures show record numbers of consumers switching, whether in search of a better deal, a green tariff or better customer service, and that switching is on track to break last year’s 5.5 million record.”