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Energy price cap guide: how will the price cap rise affect customers?

Energy price cap guide: how will the price cap rise affect customers?

The energy price cap affecting standard variable, or 'default', energy tariffs came into force on 1 January 2019, when it was met with plenty of criticism.

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.

Beat the energy price rises

All of the big six suppliers have raised their prices in 2019 following the Ofgem price cap increase. Don’t get caught out - switch to a fixed deal today!

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 £1,254 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 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 £1,254 yearly cost was still nearly £300 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.

We explain more in our Energy Price Cap Mythbuster video. Watch it now to find out why it doesn't necessarily protect consumers from paying too much for their energy.

  • Read the transcript

    Hi! You’re probably aware of the energy price cap, which came into force on 1 January 2019. It was intended to ensure that customers on default or standard variable tariffs on standard meters are not overcharged for their energy by suppliers pushing their prices up as far as possible. This is achieved by limiting the rates that suppliers can charge for gas and electricity. However, there are a few myths that some customers believe about the price cap. This could lead them to pay more than they need to on their energy deals, even with the cap in place.

    Myth 1: My energy bills won’t exceed the amount set by the price cap.

    FALSE.

    People talk about the price cap level using average figures, but it actually varies by how much you use and where you live. Remember, this is a cap on unit rates, not your actual bill - the more energy you use, the higher the costs will be.

    Myth 2: The price cap will stay the same for at least a year, meaning my costs will too.

    FALSE.

    Ofgem, the energy market regulator, will review the cap twice a year to take the wider energy market into account. For example, if the price of gas or electricity increased globally, the cap would rise too, allowing suppliers to increase their standard tariffs.

    Myth 3: I’m on a good deal if I’m paying a lower price than the price cap level.

    FALSE-ISH.

    You might be on a good deal, but don’t be lulled into a false sense of security - you might save more by switching to another deal. uSwitch can help you do that.

    You shouldn’t necessarily rely on the price cap to keep your costs down. The only reliable way of doing that is to look for cheaper deals on uSwitch. Why not get started now?

Should capping energy prices influence my decision to switch?

In a word, no.

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 your energy tariff, if you’re not keen on switching suppliers.

Beat the energy price rises

All of the big six suppliers have raised their prices in 2019 following the Ofgem price cap increase. Don’t get caught out - switch to a fixed deal today!

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
Octopus EnergyuSwitch Octopus 12M Fixed£974Compare now
Green Network EnergyGNE 18 Month Spring Special£979Compare now
ESB Energy18 Month Price Protect online v2£989Compare now
Octopus EnergyOctopus 12M Fixed£994Compare now
Green Network EnergyGNE Family Green 18 Month Fixed V25£999Compare now
Green Network EnergyGNE Italian Touch 12 Month Fixed V21£1014Compare now
npower Selectnpower Select uSwitch Exclusive v7£1019Compare now
PowershopFixed Term 12 Month 2019 Issue 7£1024Compare now
iSupplyEnergyDiscover Green 12 months 05v1£1045Compare now
ESB Energy18 Month Price Protect v1£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.

Ofgem has committed to reviewing the level of the energy price cap twice a year, effective from 1 April and again from 1 October.

How has the price cap level changed?

The price cap was confirmed by Ofgem in September 2018 at an initial cap of £1,136, with a commitment to review the cap level based on any changes in the wider market in April and October each year.

The cap didn’t actually come into force until 1 January 2019, by which time it had been revised by a pound to £1,137. It was then reviewed and an announcement was made on 7 February 2019 that the cap would be raised to £1,254, effective on 1 April.

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