An energy price cap on standard energy tariffs came into force on 1st January 2019. Ofgem (the industry regulator) announced the cap in early 2018 and it is set to save around 11 million households an average of £75 per year as reported by Ofgem & The BBC.
What does this mean for me?
The price cap is not a cap on your total energy bill but instead a cap on the price per unit of gas and of electricity. All figures you see will be based on average gas & electricity usage and averaged across different regions in the country.
The cap also only applies to standard (or default) tariffs. Every energy company has a standard tariff - and some are very poor value.
How Much Could I Save?
See the average yearly costs & savings for gas and electricity bills pre and post price cap.
|British Gas||£1,205||£1,137||£68||I'm on this deal|
|EDF||£1,228||£1,137||£91||I'm on this deal|
|E.On||£1,209||£1,137||£72||I'm on this deal|
|NPower||£1,230||£1,137||£93||I'm on this deal|
|Scottish Power||£1,257||£1,137||£120||I'm on this deal|
|SSE||£1,196||£1,137||£59||I'm on this deal|
|Ovo Energy||£1,225||£1,137||£88||I'm on this deal|
|First Utility||£1,199||£1,137||£62||I'm on this deal|
|Utility Warehouse||£1,210||£1,137||£73||I'm on this deal|
Notes: these savings are based on the average bill for a gas & electricity customer per year consuning 3,100 kWH of electricity and 12,000 kWH of gas.
Homebox Team Talk
"While the Energy Price Cap is a good thing for many people, it's only a stop-gap solution. Looking at the bigger picture, we're seeing the rollout of smart metering, next-day switching and many other innovations. I see a future where energy suppliers do more than just buy and sell your energy and other tech platforms augment these offerings with intelligent systems.
Right now, most people could switch to a better energy supplier and save even more money within a few minutes. So my advice is to do that and embrace new technology platforms to help with the ongoing management of your bills. You'll save money and be more in control, win win!"
- Hedley Smith, Homebox founder
How does the energy price cap work?
An energy price cap limits how much your energy supplier can charge you per unit of electricity or gas. You'll still be charged based on your usage.
It's important to note that there are currently two different energy price caps in place. The 'prepayment price cap' (sometimes called as 'safeguard tariff') which applies only to prepayment meters and which is expected to last until 2020 - and the 'default tariff cap' which is expected to last until 2023.
The default tariff cap applies to all standard or 'default' tariffs. These are sometimes poor value and energy suppliers often automatically move you on to them.
Why is the price cap being introduced?
On 19 July 2018, the Domestic Gas and Electricity (Tariff Cap) Act came into force. This legislation required Ofgem (the energy industry regulator) to implement a temporary cap on standard tariffs or ‘default tariffs’.
This happened due to mounting political pressure over rising energy bills and more specifically the rising bills for those who do not switch to better deals frequently. These customers all to often ended up on expensive 'standard' tariffs.
It's important to note that some leading energy companies have standard tariffs which are not expensive at all.
Who decides the level of the cap?
Ofgem (the industry regulator) decides the level of the cap. They will update the caps twice a year in February and August, to reflect the price cap levels that will come into effect in April and October.
How is the price cap calculated?
Ofgem calculates the level based on the latest estimates of the costs for suppliers to supply their customers with electricity and gas. This includes the costs of wholesale energy, network costs, environmental and social programme costs and tax. They also allow suppliers to make a fair level of profit.
The cap is calculated by providing suppliers with two figures (for gas and electricity respectively); the maximum charge at nil-consumption and the maximum charge at the current Typical Domestic Consumption Values (TDCV). From here energy suppliers can calculate the maximum they can charge for any level of usage.
Figures are different per region in the UK and there are also different figures for different payment methods.
Where can I find out more information?
Some good places to find out more include: