Skip to main content
price caps

Energy price cap — will it save you money?

When the Government announced a cap of £1,137 per year on the price of standard variable or ‘default’ energy tariffs, it was met with plenty of criticism ahead of its implementation date of 1 January 2019. But what is it and how does it work? Find out everything you need to know about the energy tariff cap — including whether this default tariff cap will help or hurt your bills — right here.

Worried about your winter energy costs?

Don't get caught out in the cold. Compare fixed rate energy deals now to secure your costs this winter!

What is the default tariff cap?

The default tariff cap (also known as the safeguard tariff) is a limit on the unit rate and standing charge that energy suppliers can charge for standard variable - or ‘default’ - tariffs, and is set by Ofgem, the energy regulator.

This is only a cap on what suppliers can charge for standard tariffs, however; it does not ‘lock’ rates, and is therefore subject to a price rise or cut pending review by Ofgem.

The current default tariff cap is set at £1,137 per year (for the typical dual fuel customer paying by direct debit) on standard variable rate tariffs.

Standard variable tariffs are usually the most expensive rates that a customer can be on. If a customer hasn’t switched energy before, or has rolled off of a fixed energy deal, they are likely to be on a default tariff.

Why is the energy price cap controversial?

There are a few reasons why the energy price cap has come under fire from energy experts:

Better savings can be found by switching — At the time of the price cap announcement, the £1,137 yearly cost was still over £200 more than the cheapest energy deal on the market.

A cap hurts competition — Introducing a cap does not encourage suppliers to compete for business by offering better tariffs or improving customer service. There is no pressure on energy companies to innovate if customers believe they are ‘safeguarded’ from high costs and less likely to take their business elsewhere.

False sense of security — The cap can still go up (or down) as energy prices will always be subject to wholesale costs, distribution costs and other factors. The concern is that consumers will assume the price cap means they are protected from fluctuating costs by the Government’s cap.

Should I switch if my prices are already capped?

You should certainly consider it.

You should always compare your current energy deal using a price comparison site like uSwitch to understand whether you could be paying less or getting better service by moving elsewhere.

A price cap only applies to you if you’re on a standard variable rate tariff. These tariffs are already some of the most expensive on the market, so it’s likely you could save by at least switching tariffs, if you’re not keen on switching suppliers.

Worried about your winter energy costs?

Don't get caught out in the cold. Compare fixed rate energy deals now to secure your costs this winter!

And remember, the cap doesn’t protect you from price changes. Ofgem may raise or lower the cap per the wholesale market. So, when comparing energy deals, consider a fixed rate plan to secure your rates for a year or more and protect yourself from potential price increases.

Cheapest fixed plans now available through uSwitch

SupplierPlan namePrice
LumoApp Only Fixed v17£987Compare now
Green Network EnergyGNE 18 Month Winter Warmer£1005Compare now
Octopus EnergyuSwitch Exclusive Octopus 12M Fixed£1019Compare now
Tonik EnergyGo Green (1 Year) v4£1028Compare now
Octopus EnergyOctopus 12M Fixed£1029Compare now
Green Network EnergyGNE Family Green 18 Month Fixed V23£1030Compare now
Green Network EnergyGNE Italian Touch 12 Month Fixed V20£1045Compare now
ENGIEENGIE Fixed Sept 20 v2£1050Compare now
Bristol EnergyBristol Energy 1 Year Fix Issue 28£1051Compare now
British GasEnergy Plus Protection Jan 2020£1052Compare now
Based on average bill sizes for a medium energy user on a dual fuel plan paying by monthly direct debit, and averaged across all regions. This information is updated hourly with energy plans which are available to switch to through uSwitch. To appear in this table, plans must be available in at least 7 of the 14 regions.

How is the price cap set?

The price cap is set by Ofgem, the regulator for the energy industry.

The methodology for Ofgem creating a cap level factors in a range of costs, such as the wholesale cost of energy, network costs, policy costs, operating costs and prepayment meter costs.

In 2019, Ofgem is expected to update the level of the cap effective from 1 April, and again effective 1 October. Due to rising wholesale costs, many experts believe the April update will see the cap go up, meaning energy suppliers may increase the cost of their standard tariffs.

Read more…

Worried about your winter energy costs?

Don't get caught out in the cold. Compare fixed rate energy deals now to secure your costs this winter!