Created by: John Fitzsimons | 2 January 2019

The energy price cap and what it means for you

It can’t have escaped your notice that it’s all got a bit chilly lately. Indeed the temperatures have got so cold that we’ve already had our first cases of snow in the UK. Winter is indeed here.

At this time of year, the heating is on far more often, and that means higher energy bills. The good news though is that an energy price cap is being introduced, to ensure that people on the most expensive deals don’t get completely ripped off by suppliers.

So how does the energy cap work and who is affected by it?

We don’t switch tariffs enough

When you sign up with an energy supplier, you normally go onto a fixed tariff, which locks the price you pay in for a year or two.

However, once that deal comes to an end you move onto the supplier’s standard tariff. These are the most expensive tariffs on the market. They are also the deals affected by the price rises that suppliers periodically announce.

You might think that faced with a jump in their bills, households would be keen to shop around and find a cheaper deal. But in reality, millions of households have never switched at all and so are sat on these awful, costly tariffs, spending a small fortune for their energy.

Let’s put into context how much more these households are paying for their energy.

According to data from Ofgem, the energy regulator, the average standard tariff costs typical users a massive £1,206 a year. Yet the cheapest available tariff would cost those same users around £921 a year, the best part of £300 less.

The arrival of the energy price cap

That’s why the energy price cap is being introduced from the 1st January 2019. Suppliers will have to drop the price of their costly tariffs to below the level of the cap.

The cap has been set at £1,137 per year for a typical dual fuel household who pays their bill by direct debit.

Ofgem reckons that as many as 11 million households will benefit from the cap, saving on average around £76 a year, though people on the most expensive tariffs will save as much as £120. Of course, the actual savings will vary depending on what your current tariff charges and how much energy you use.

The cap will be reviewed twice every year, in April and October, so it could be brought down further in the future.

Help yourself to further savings

The energy price cap has been introduced in order to protect those people who are apathetic about shopping around for energy deals and who are being taken advantage of by suppliers.

But the truth is that £1,137 a year for a typical energy user is still very expensive.

If you are serious about saving money on your energy bill, then don’t rely on a price cap from the regulators to do it, shop around yourself for a new energy deal.

There are now a host of price comparison sites which can help you work out the cheapest deals available in your area, and the actual process of moving between suppliers is incredibly quick, typically taking less than three weeks.

If you don’t want to do that, then there are also plenty of auto-switching services worth a look, such as weflip and Flipper. These sites will switch your supplier for you, not just once but on an ongoing basis, whenever they identify a new tariff which would save you money.

Just be sure to do your research first on how they make their money and how many suppliers they take into consideration when looking for a cheaper tariff on your behalf.

Savings Energy price cap Energy suppliers Energy tariffs explained

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