New energy price cap comes into force
…but consumers should still shop around to find a better energy deal.
The level of the energy price cap – which was introduced by Ofgem to make bills more affordable for people on standard and default tariffs – has decreased by £75. But while some will see their bills cut, many still overpay for their energy by hundreds of pounds.
Data from Compare the Market has shown that the drop in the price cap is failing to save people money – and that customers could save an average of £253 by switching from a standard variable or default tariff to the most competitive fixed or variable rate tariffs.
Compare the Market’s research also shows the lowest priced fixed and variable rate tariffs have fallen by an average of £26 since 1st April – when Ofgem increased the price cap level by £117.
About the energy price cap
The energy price cap, which first came into effect on 1 January 2019, puts a ceiling on the unit (kWh) price of energy, and on the standing charge. For a typical user the maximum price for energy has now fallen by £75/yr, from £1,254/yr to £1,179/yr. The cap was introduced to protect households on default standard variable rate (SVR) tariffs, which are often the most expensive deals in the energy market.
Customers are reminded that the cap is not on their total bill, meaning that people who use more energy will still pay more than those who use less.
People who switch are hundreds of pounds better off
Peter Earl, Head of Energy at Compare the Market, commented: “People should not see the price cap as a blessing or a safeguard – rather, merely a cap on the absolute amount of money they should be paying for their energy. The cap has done little to encourage people to switch, but instead may have switched people off, as they believe they are being protected.
“A key point which has been largely overlooked is that the price protection provided by this latest cap level change is only in place for six months, after which it will likely change again based on variations in wholesale prices. Rather than being an annual saving of £75, people are unlikely to see the full potential of this discount.”
Peter added: “However, people who have opted to switch since the price cap was originally introduced back in January have saved hundreds of pounds on their annual energy bills in comparison to those that haven’t.”
The price cap level for prepayment tariffs also fell last week, from a maximum price of £1,242/yr to £1,217/yr for a typical household.