What is the energy price cap?

The level of the energy price cap – designed to make bills for those on standard and default tariffs more affordable – will decrease on 1 October 2019. But many will still be left overpaying for their energy… 

Peter Earl From the Energy team
3
minute read
posted

What's happening to the cap?

The energy price cap, which came into effect on 1 January 2019, puts a ceiling on the unit (kWh) price of energy and on the standing charge applied to bills. However, it doesn’t cap your total energy bill. The more energy a household uses, the higher its bill will be.

For average energy consumption households, the cap is set to decrease by 6.6% – or around £75 a year – to £1,179 from 1 October, according to the energy market regulator Ofgem, which sets the cap. This follows an increase to £1,254 on 1 April, from £1,137 when the cap was introduced on 1 January. The price cap for pre-payment meter customers has also decreased on average, by £25 to £1,217 a year, for the same period.

what is the energy price cap?

What does the energy price cap mean for me?

Some energy providers have introduced price decreases for their default and SVR tariffs in response to the decrease in the cap level, meaning bills for some will get cheaper. However, despite a reduction in the cap level, consumers that fail to shop around or opt to switch their energy to fixed rate tariffs will, most likely, continue to overpay for their energy as they miss out on cheaper deals on the market.

Default and SVR tariffs are usually more expensive than fixed rate tariffs. Fixed rate tariffs last for a set amount of time, usually 12 or 24 months, with the price per unit of energy fixed for the duration of the deal. You’re not affected by the cap if you’re on a fixed tariff.

Your tariff details can be found on your latest bill or in your online account. If you’ve never switched from one energy company to another, or haven’t switched for a while, it’s likely you’re on a default or standard tariff.

How will the cap work?

The new cap of £1,179 will apply to default and standard tariff customers who get their gas and electricity from the same supplier, pay by direct debit and use an average amount of energy each year. The figure varies if you use a different payment method.

The actual size of your bill depends on your energy consumption, so you could end up paying more, or less, than the level of the cap, depending on your usage.

Ofgem reviews the cap every six months, so it will change again next spring. Whether it goes up or down will largely depend on price movements in the wholesale energy markets.

How will the cap work?

How to compare energy prices

It’s quick and straightforward to run an energy comparison at Compare the Market. We’ll show you a range of tariffs, and once you’ve chosen a switchable tariff, your switch could be completed within three weeks, with no interruption to your supply.

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