Back in September Ofgem unveiled plans for an energy price cap that would cut prices by an average of £75 per year for around 11 million households. On the announcement of the energy price cap, Dermot Nolan, chief executive of Ofgem, said: “Ofgem has made full use of the powers Parliament has given us to propose a tough price cap which will give a fairer deal to consumers on poor value default tariffs. Once the price cap is in place, all households in Great Britain covered by the cap will be protected from being overcharged for their energy.”
However there has been some confusion over the energy price cap: whether the cap is a definite fixed amount, whether it will represent the best deal, and so on. That’s why we thought we’d take a look at five common misconceptions about the energy price cap that could end up costing you.
1. The Energy Price Cap is not a fixed total amount
When the energy price cap was announced as being £1137 for the typical user, it has led many to think that prices will be capped at £1137 in its entirety. This is not the case. As Martin Lewis founder of MoneySavingExpert.com , said: “The energy price cap which is being launched is misnamed, it is not a cap on the price you pay, it’s a cap on the rate that will be charged…The cap depends on your usage, the £1,137 figure is a nominal figure based on what the cap would be for someone with typical usage, if you have higher usage your cap will be higher, if you have lower usage your cap will be lower.”
2. The energy price cap is related to units and standing charges
Rather than being an absolute figure, the £1137 “typical” annual energy costing is based on the new capped price per unit. The price cap level of £1137 represents a dual fuel customer paying by direct debit who uses a typical amount of gas and electricity. The per unit level of the price cap for a typical customer paying by direct debit will be 17p per kWh for electricity-only customers and 4p per kWh for gas-only. customers. Standing charges are capped at £83 for electricity-only customers, £94 for gas-only customers and £177 for dual-fuel customers.
3. It could still be cheaper to switch energy supplier
While the average household will save around £76, and some could even save up to £120, it is being argued that the current rate does not represent a good price. Indeed, switching energy supplier could save you hundreds of pounds per year, so even with the energy price cap in place it still pays to shop around for a good deal, especially if you are currently with one of the Big 6 energy suppliers.
4. The energy price cap may rise
The current energy price cap is an initial cap. Reviews, and no doubt a rise, in the cap level will take place in April and October.
5. Energy efficiency is still important
Of course one of the best ways to save money on your energy bills, regardless of the energy price cap, is to focus on energy efficiency. By adopting energy efficient behaviours and technology throughout your property you could save hundreds of pounds per year.
Cocoon Window Insulation is a trading style of Glaze and Save Ltd