Ofgem has announced that it is to reduce its energy price cap on standard variable tariffs for the second consecutive time by £17 to a new level of £1,162, effective from 1 April 2020. This represents a 1.4% lowering of the current price cap level of £1,179.
Homes on prepayment meters will see an identical reduction in their cap, which falls from £1,217 to £1,200.
The price cap was first introduced in January 2019 with the intention of protecting customers on standard variable tariffs from high charges implemented by suppliers. However, the market has consistently seen reductions in the wholesale prices of gas and electricity over the past year, meaning that the cap can be lowered. In theory, this is good news for consumers, but the reality is slightly different - there are plenty of cheaper fixed deals on the market which are better value for money than standard variable deals capped by the price cap.
Customers can use Uswitch’s price cap calculator to see what the difference is between the new price cap level and the cheapest available deal in their region. This difference is then shown in terms of what that financial saving could buy across a range of categories. You can try it at the bottom of the page.
Commenting on the new price cap level, Rik Smith, energy expert for Uswitch, said: “If you’re one of the 11 million households still on your supplier’s default tariff, you could be forgiven for thinking that £17 a year off your energy bill is better than nothing. But that pales into insignificance when you realise you could be as much as £377 a year better off by moving away from your poor value standard deal.
“This is the warning for anyone depending on the price cap to give them a better deal: it really won’t. The price cap is still higher than it was when it was introduced a year ago, while the price of the best value deals has been plummeting for most of that time. The cheapest tariff now costs £180 less than this time last year.
“Uswitch data suggests that satisfaction with the energy market is increasing, probably because more people are switching - in response to huge price rises last April when the level of the price cap went up by £117, and due to fierce competition among energy suppliers, including big household names."
*Cost of living data: Family resort | O2 Arena | Disneyland Paris | Premier League tickets | Weekly transport | Weekly food shop | Lanzarote all-inclusive | Benidorm all-inclusive | Pub meal | Fast food combo meal | Video game | 1GB mobile data | Indian takeaway for two | Takeaway pizza for two | Pint of beer | Theme park tickets | Netflix subscription | Tank of petrol | Annual car service | All other data