What’s happened to the energy price cap?
On 1 April 2020, Ofgem’s new price cap was introduced. This sets a limit on the rates you pay for each unit of gas and electricity you use, and is usually reviewed twice a year.
The new cap is set at £1,127 per year. The change will see annual bills fall for many – however as it is a cap on unit price, if you use more, you'll still be charged more for that.
The price cap level for prepayment tariffs is also falling by £19 per year, to £1,163 per year.
Falling oil prices have resulted in lower energy prices, so now would be a good time to check if you’re getting the best deal for you.
Are the capped deals good value?
No – over 100 cheaper deals are available.
The caps exist to prevent energy companies from imposing eye-popping price hikes on their customers. But they’re not meant to be the cheapest prices on the market.
If you’re on a standard or a safeguard tariff, the caps mean your price won’t go up in the next six months (they’re reviewed twice a year). But you could still be paying over £280 a year more than you would if you switched to a cheaper, fixed-rate deal*.
If you’re on a prepayment meter, you can still shop around for a cheaper tariff. And it may be worth exploring whether you can switch from a prepayment to a ‘credit’ tariff, where you pay in arrears for the energy you’ve used.
You’ll need to talk to your landlord if you’re renting to see if this is feasible, and you’ll need to see if you can find a new supplier who’s willing to change your meter. You can find out more about switching from a prepayment to a credit meter in this guide.
Why are the caps falling?
The main driver for energy prices is how much gas and electricity cost on the wholesale markets.
So far in 2019/20, the weather across most of Europe has been relatively mild, which means we’re using less energy to keep our homes warm. Reduced demand triggers a fall in the wholesale prices paid by our energy suppliers, and Ofgem cuts the price cap to ensure these savings are passed on to consumers.
But the price of fixed-rate tariffs also reflects what’s happening to wholesale prices, which is why such substantial savings remain available to those who switch.
It’s also worth remembering that, if you switch and fix this winter, you lock in today’s low price for 12 months. So if the weather turns cold and an increase in wholesale prices leads to the cap being increased in October, you’ll be insulated from the price rise.
Why should I switch energy suppliers?
The easiest way to bring your bills down is by switching supplier. In fact, you could save at least £289* on your bills.
The cheapest deals on the market are up to £371 less than the new price cap, despite the reduction announced this February.
All you need to do is tell us a little about yourself, your home and your current usage figures, which will help your new supplier calculate a more accurate bill than using estimates. Then you’ll be able to compare quotes from providers across the market, from the Big Six to smaller companies, as well as ‘green’ energy suppliers.
Once you’ve found the deal you want, click through to the provider’s website to finalise your purchase and start saving.
Thanks to the Energy Switch Guarantee, your new provider will take care of all the details, your service won’t be interrupted, and you should be on your new tariff within 21 days.
Never worry about switching again
*51% of customers that applied to switch via MoneySuperMarket could save at least £289.40, March 2020.