Want to know more about the Energy Price Cap and if you are really being protected if you stay with your current supplier? TopCashback’s recent research shows over two thirds of Brits are using more energy at home this year as a result of the pandemic, with a third of people seeing an increase in their energy bills. To help you, we have answered some common questions about what the Energy Price Cap does, what it means for you and how you can get your bills cheaper.
The Energy Price Cap, also known as default tariff cap or the safeguard tariff, limits the price a supplier can charge you per kWh of electricity and gas (the unit measure which your bill is calculated from). This price is different from your total bill cost, which will go up or down depending on how many units of energy you use. So, this means your energy bill isn’t capped – as this will also depend on how much energy you use but, how much companies can charge for each unit cannot go above the capped price. The rate is set by Ofgem, the energy regulator, and is reviewed twice a year.
The cap won’t apply if you are on a fixed-term energy tariff or you actively chose to sign up to a renewable energy tariff (standard variable) which Ofgem has exempted from the cap. The cap only applies to energy supplier’s standard variable or ‘default’ tariffs.
These tariffs are an energy supplier’s basic offer and tend to apply if you haven’t shopped around for a better deal. They are typically poorer value and more expensive than a non-default, fixed-term contract deal, which you can choose to switch to. You will often need to renew fixed-term contracts after a year or more. If you have never switched, or not switched for a long time, you are likely to be on one of these tariffs. It is estimated that over half of all households in Great Britain are on these tariffs because they have never switched or have not done so recently.The most common type of default deal is a ‘standard variable’ tariff. A standard variable tariff has prices that can go up and down with the market. These tariffs don’t generally have an end date and won’t have a fixed-term period applying to any of the contract terms and conditions, such as your gas or electricity unit prices. You could be put on one if a fixed-term energy contract ends and you’ve not chosen a new one.
It’s best to contact your energy supplier. Suppliers must apply the cap set by Ofcom. They must also write to tell you if your tariff is changed in a way that could disadvantage you or the tariff you are on is changing and will no longer be available.
Yes, even if you are covered by the cap you should still look into switching. The cap is in place to stop companies charging excessive prices so people who are vulnerable and less likely to shop around won’t be caught out. This means it is still highly likely that you will still get a far better deal by switching. Even if you are using less energy and paying less than the cap it is highly likely that you will still get a cheaper deal elsewhere.Jonathan Brearley, Chief Executive of Ofgem said: “Although those protected by the cap are paying a fair price, they can also reduce their energy bills further by shopping around for a better deal.”So, whilst the cap stops unfair charges occurring it still means you could save far more by switching your tariff or supplier. Using our Compare Energy tool for the best deal for you may help with this. You can shop around for the best deal and get up to £44 cashback when you switch.Assessing your options is important and comparing the Big Six suppliers to smaller challenger firms is equally as important. Our research found that 48% of people have switched to smaller, greener suppliers to save themselves money.
The current default tariff cap is set at £1,042 per year. This rate came into effect from 1 October 2020, a new price cap has been announced which will come into effect on 1 April 2021, the price cap has increased by £96 to £1,138 for default tariff customers.There is a separate cap for prepayment tariffs, which is reviewed independently of the SVT cap by Ofgem. Currently, the prepayment cap is £1,070. This rate came into effect on 1 October 2020. A new price cap has been announced which will come into effect on 1 April 2021, the price cap has increased by £87 to £1,156 for pre-payment meter customers. These estimated values are based on the average energy household cost and so you could still be charged more than this if you use more energy.To help find a cheaper energy provider and save money on your energy bills you can use a energy comparison tool such as our TopCashback Compare Energy tool which can help you find the best deal and earn cashback on your switch, compared to the new price cap our current cheapest energy deal is on average £188 per year less than the new cap, based on typical use.For more information on the level of the Energy Price Cap and how it is estimated then head to Ofgem’s website .