What is the energy price cap?

The energy price cap, designed to make standard bills more affordable, increased on 1st April, meaning prices are rising for millions.

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. However, it doesn't cap your total energy bill, it just puts a price limit on each unit of energy you use, and on your standing charges. The more energy a household uses, the higher its bill will be.

For average consumption households, the cap was set at £1,137 a year when it was introduced from 1st January, but it increased to £1,254 on 1 April 2019. It will stay at this level for the six months until October, according to the energy market regulator, Ofgem, which sets the cap. The price cap for pre-payment meter customers has also increased on average, by £106 to £1,242 a year, for the same period.

what is the energy price cap?

What does the energy price cap mean for you?

Many energy providers have introduced price increases for their default and (SVR) tariffs in response to the increase in the cap level. These higher energy costs will be seen in bills sent out from now on.

This serves as a timely reminder to compare energy prices and see if you can find a better tariff.

Default and SVR tariffs are usually more expensive than the main alternative – fixed rate tariffs. Fixed 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 area. 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 current cap of £1,254 applies 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 usuage.

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

How will the cap work?

How do I find the right tariff for me?

We estimate that someone with a default or standard dual fuel (gas and electricity) tariff who uses an average amount of energy could save £453** a year by switching energy supplier.

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 your new tariff, your switch should be completed within three weeks, with no interruption to your supply.

**Where a saving can be achieved 40% of people could achieve a saving of £453.00 on their dual fuel energy costs based on Compare the Market data in May 2019.

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