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Calls for energy price cap review

Written by: Emma Lunn
Compare The Market is calling on the government to review the energy price cap as the gap between default and fixed tariffs widens to more than £300.

The price comparison site said the energy price cap is disadvantaging those on standard and default tariffs and causing confusion amongst consumers who wrongly believe that their total energy costs are capped.

Compare The Market is calling on Kwasi Kwarteng – the new minister of state at the department for business, energy and industrial strategy – to review the cap as a priority.

The widening gap

The gap between the current energy price cap level and the average price of the cheapest available fixed price tariffs has widened to £303 since 1 April 2019, according to analysis by the site.

Prices in the fixed rate tariff market have dropped over the past four months since the new energy price cap limit was set, with the average cheapest available dual fuel fixed rate tariff falling by £29, from £980 to £951.

The energy price cap currently stands at £1,254, following an increase of £117 to the price cap on 1 April. This means the difference between the cheapest tariff and the cap is £303.

Compare The Market said the growing price gap between fixed and variable tariffs means that the 15.2 million customers stuck on a default or standard variable tariff are collectively missing out on more than £440m of savings by not switching to a competitively priced fixed rate tariff.

Customer inertia

Peter Earl, head of energy at, said: “These figures highlight the woefully ineffective nature of the energy price cap. A policy that was designed to protect customers from excessive prices has in fact kept customers stuck on standard and default tariffs facing artificially high prices – while those who choose to be on a fixed rate tariff are benefitting from falling prices.

“Furthermore, it has encouraged inertia from those on standard and default tariffs, who assume that they are protected from high prices under the cap scheme. Many consumers wrongly believe that people’s bills are capped under the scheme – in fact, it is only the unit price of energy that is capped. The concern is that cost-conscious consumers could be using more energy under the cap and in for an expensive shock when their bill lands.

“The regulator is due to announce the new energy price cap level on 7 August 2019, with the industry largely expecting the cap to fall from 1 October 2019 when the new cap level comes into effect. Kwasi Kwarteng should urgently review the effectiveness of the price cap. There is no doubt in our minds that it should be scrapped sooner rather than later.”

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