The Government has instructed energy companies to ensure that customers on fixed tariffs also benefit from the £150 reduction in household bills, a move announced in the recent Budget.
Chancellor Rachel Reeves confirmed her intention to reduce energy costs and ease the cost of living, with the average household bill set to fall by £150 from April.
These savings, Ms Reeves explained, would be achieved by abolishing the Energy Companies Obligation (Eco) scheme, which she said had burdened households with an extra £1.7bn a year.
Energy Secretary Ed Miliband formally wrote to energy companies on Wednesday, urging them to extend the benefit of this reduction to consumers currently on fixed energy tariffs.
These rates guarantee a consistent unit rate and ongoing charge for the duration of the agreed contract, typically a year or more.
Instead, those with standard variable rates experience fluctuating rates, which adjust based on wholesale market costs paid by suppliers, with no set time frame.
In his letter, Mr Miliband wrote: “This Government has made a clear commitment to reducing people's bills and helping to ease financial pressure on millions of families, as we know that energy costs cause so much anxiety for many people, and that is why we are acting now.
“As we move forward, we want to make clear our expectation that every penny of our intervention in this Budget will be passed on to consumers, including those on existing fixed rates.
“Around 37% of the market now has a fixed rate and the Government is clear that it must benefit from this reduction in bills.
“We urge you to continue working with our department to ensure this happens.
“This close, joint work will be welcome and reassuring to customers as it demonstrates our shared commitment to fairness and consumer protection.
“Thank you once again for your partnership and efforts to ensure these positive changes reach every home.”
According to the latest data from Ofgem, around 21 million household customer energy accounts are on a fixed tariff, while around 34 million remain on a standard variable tariff.
Ned Hammond, deputy director of customer policy at Energy UK, which represents suppliers, said: “The energy industry has long called for government action to reduce costs, having seen firsthand how many households are struggling to pay their energy bills and with customer debt at record levels.
“So last week's budget announcement was very welcome and suppliers will of course be looking to pass on the savings. However, some new costs are also expected to be added to bills in the coming months.
“While most customers stay within the price cap, where the amount they pay for energy is set by Ofgem, suppliers also set their own fixed tariffs to compete on price with each other and therefore have every reason to pass on any cost savings to these.”
