From December 2018, the government will introduce an energy price cap for all customers on standard variable tariffs in England, Wales and Scotland. It will remain in place until 2023.
Today, Ofgem announced the proposed cap limit as £1,136 for the average consumer — saving around £75 on a standard variable tariff bill.
Though this saving sounds positive, it is a far cry from the savings on offer from switching energy, which can slash consumers' bills by up to £482*.
Do what the price cap won't - fix your energy costs today
Rather than tackling the very real challenges faced by vulnerable households, this price cap condemns energy customers to more of the same – high bills, poor service and suppliers resting on their laurels.
There’s concern that customers will feel a false sense of security, staying put with their supplier on an expensive tariff — believing they are now getting a better deal. This could damage competition in the energy market.
The price cap could even push up prices for some customers: Ofgem’s own assessment of the proposed price cap shows that unfortunately customers who regularly seek out the best deals will be the ones hardest hit, as the cost of the cheapest deals may rise.
Richard Neudegg, Head of Regulation at uSwitch believes the cap is a step in the wrong direction:
"It’s vital that this cap doesn’t undo the great progress that has been made towards building a fully competitive energy market. There are over 70 suppliers in the market and switching is at record levels.
"We’re about to reach a tipping point, where the majority of customers will no longer be on a standard tariff – but that’s all at risk under a cap.
"Households should be under no illusion of protection. Prices can still rise when there is a cap, as we’ve seen with the two increases to the prepayment cap this year that have added £104 to energy bills for prepayment customers."
*Save up to £482 on your energy bills: Between 1 Jan 2018 and 30 Jun 2018, at least 10% of people who switched energy supplier for both gas & electricity with uSwitch.com saved £482 or more.