You are here: Home - Household Bills - News -

Energy price cap to save billpayers £75

0
Written by: Paloma Kubiak
06/09/2018
The regulator has proposed implementing an energy price cap which would save millions of households on pricey default tariffs £75 a year on average.

Energy suppliers won’t be able to charge more than £1,136 per year for a typical dual fuel customer paying by direct debit, under the proposals.

This would mean over 11 million households on poor value default tariffs could save around £75 on average – around £1bn collectively.

But the exact savings would depend on the price of the current deal and how much energy is used, whether customers have both gas and electricity and how customers pay for their energy.

According to the regulator Ofgem, a typical customer on the most expensive tariff (ScottishPower) could save over £120, while some could save just £13 a year (Utility Warehouse) if the measures are introduced.

Dermot Nolan, chief executive of Ofgem, said: “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. Consumers can have confidence that falls in energy costs will be passed on to them and if costs increase, Ofgem will ensure that any rise will be due to genuine increases in energy costs rather than supplier profiteering.”

How good is the energy price cap?

While a welcome step by Ofgem to take greater control of the energy price rip-off, experts said the move could actually lead to customer complacency.

Stephen Murray, energy expert at MoneySuperMarket, said: “You might think Christmas has come early with the savings mooted in today’s announcement, but you’d be missing the bigger picture.

“There are over 100 tariffs available right now which are cheaper than the proposed level of the price cap at £1,136. That means switching today could save you £250 or more, and there’s no need to wait for a price cap that would actually save you on average £75.”

Murray added that the price cap can go up as well as down as Ofgem will review the level of the cap  in April and October every year.

Peter Earl, head of energy at Compare the Market, said there’s concern the price cap will make energy more expensive. “More than half of UK adults think the average cost of energy will increase post price cap, as energy companies raise the prices of their best value tariffs in order to offset the impact of the price cap. We’re concerned engaged energy shoppers will suffer, paying an inertia tax to subsidise households stuck on standard variable tariffs. This may be the great unintended consequence of the price cap.”

Ofgem expects to confirm the proposals in November with the aim of the price cap coming into force at the end of the year, staying in place until 2023 at the latest.

The move comes after Ofgem capped bills through its safeguard tariff for four million pre-payment meter households. And in February this year the regulator extended it to one million more vulnerable households on poor value default deals who already received the government’s ‘Warm Home Discount’.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Seven ways to get help with energy bills this winter

We knew today’s announcement was going to be painful, but it’s still a shock to the system. When this kick...

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week