Ofgem has today announced a reduction in the level of its energy price cap by £75 for standard variable tariffs and £25 for prepayment tariffs. This means that customers on those tariffs should see themselves paying annual fees of around £1,179 and £1,217 respectively.
This is the second and final price cap level review of 2019 following February’s increase. Due to come into force in October, the reduction is a result of falling wholesale costs for gas and electricity throughout Europe.
While this latest price cap level revision has resulted in the cap being lowered, consumers will continue to be advised that the price cap will not generally protect them from paying too much for their energy.
Richard Neudegg, Head of Regulation at Uswitch, said: “On paper, a price cap reduction seems like good news for household energy bills, but the new level of the cap - which doesn’t kick in until October - is still £333 more expensive than the cheapest deal which people can switch to today.
“Ofgem has been able to make this cut thanks to a significant fall in wholesale energy prices since the start of the year. But for customers who stayed put on standard energy tariffs, the price cap doesn’t pass on cost reductions of the same size or speed as switching does, meaning they’ve been stuck paying higher prices for months when much cheaper deals have been available elsewhere.
“11 million households on credit meters are in line for an average cut of £75 per year. But the four million households with prepayment meters will only see a £25 fall, due to a change in the way their cap is calculated. So those who are often least able to afford their bills are getting less of a cut, and will actually end up paying more per year than households with credit meters. This highlights that a blanket cap is not the best way to help those most in need, and that those people would benefit from more targeted protection.
“The only way for consumers to avoid the roller-coaster price changes we’ve seen with the SVT cap is to take power into their own hands and shop around for a cheaper fixed deal. Locking in a cheap deal now means people can be certain that the price they pay will remain steady for the year ahead.”
Want to switch to a cheaper deal? Run an energy comparison to get started.