This could be great news for people who are already overpaying for their energy costs – but does it mean that you’ll automatically save? It all comes down to the size of your household and the energy use in your home… and you could still save more by switching to a cheaper deal! Here’s the lowdown…
What is the energy price cap?
The energy price cap is a £1,137 upper limit being set by energy regulator Ofgem: it means that suppliers have to ensure that the rates of their standard tariff to meet this limit. It’s a bit more complicated that the name suggests – and despite the misleading title, this is not a cap on annual fuel bills. Rather, it’s a figure that tells energy companies the rate at which they should set their tariffs, and it’s calculated based on the usage of an average dual fuel customer who pays by direct debits. This means that annual bills could still be substantially higher for families that use a lot of energy! Important to note, too, that this is a temporary figure: come April, the cap is expected to raise substantially, meaning bills will rise.
Will it help me?
Given that the cap is per unit of energy, many customers can expect to see their bills drop as the price of the energy they use falls slightly. Expected annual savings for individual bill payers will be around the £100 mark, although the government have indicated that this could lead to savings of as much as £285.
If your energy usage falls outside of the ‘typical’ norms – whether that’s higher or lower – then you can expect your bill to be affected proportionately. So, if you usually pay a lot more than £1000, don’t expect that to change drastically: your cap will be higher. Likewise, people who live alone or in a small household, or who use very little energy, will have a lower cap and therefore see smaller benefits.
Is there anything else I need to do?
Switch and save! Unless you have already switched to a low cost tariff in the past 12 months or so, there’s a very high likelihood that you could be saving lots of money – with or without Ofgem’s price cap. Energy companies are very competitive at the moment, meaning that many will often attractive deals to try and lure new customers in. You should take advantage, because staying with one company for several years usually means losing your promotional rates and ending up spending more than you need to.
Luckily, switching is extremely simple. Start by comparing the rates available in your area, using any of the established comparison sites. If you have your most recent bill to hand then you’ll be able to get a more accurate indication of prices and savings. Once you have decided who to go with, you can apply for an account – they’ll handle the rest, including getting in touch with your existing supplier to let them know that you’re switching.
Neither the energy cap nor switching suppliers will guarantee savings, but most people will find that they’re better off by taking advantage of the options out there. It’s also a great sign that we’re moving towards fairer energy for customers, and may be a sign of even better deals to come.