What is the latest energy price cap and what does it mean for me?
- The latest cap was announced on 7 August with Ofgem setting the price at £1,0421 for the average bill
- A reduction in wholesale costs means this is £84 lower than the previous cap, however there are still over 80 cheaper tariffs in the market
- Our cheapest tariff is £8412, so relying on the price cap means you’ll pay at least £189 more for your energy on average
The current price cap is £1,042,
if you switch today you can save at least
more than the price cap
Tariffs switchable via MoneySuperMarket as at 8 September 2020
The energy regulator Ofgem sets the energy price cap in a bid to limit the price a supplier can charge you per unit of electricity and gas. The unit measure, which your energy bill is calculated from and which you may see on your bills, is a kilowatt-hour (kWh).
However, the energy cap only applies to customers who are on a prepayment meter or a standard variable tariff, which is a providers most expensive tariff. If you’ve never switched, or your last switch was over a year ago, you’ll have usually defaulted to a standard tariff when your fixed period ends.
Furthermore the price cap does not limit your total energy bill which will vary depending on how much energy you use.
On 7 August 2020, Ofgem’s latest price cap was announced. The fall in wholesale energy costs driven by the slowdown in energy consumption through lockdown means the new cap has fallen by £84. The new cap is set at £1,042 per year, and this change will see annual bills fall for many.
The price cap level for prepayment tariffs is also falling by £93, to £1,070 per year.
For the 11m UK household who have never switched or who have now rolled onto an expensive default tariff, switching your energy provider is a quick and easy way to make the most savings in these uncertain times.
Whilst energy companies are reducing prices for those on their most expensive tariffs, you can still save at least £189 by switching to our cheapest deals.
Energy prices have been at a 3-year low and now is the time to lock in a cheap fixed rate deal for the next 12 months before prices rise.”
How the cap has changed over time
The cheapest in market tariff switchable via MoneySuperMarket on the effective date of each price cap
The price cap was first introduced in November 2018 and is typically reviewed every 6 months. While it is intended to ensure customers pay a fair price for their energy, it is a cap on the most expensive tariffs and does not safeguard you against price fluctuations.
On average the cheapest tariff in market for the last 5 caps has been over £200 cheaper. It’s also worth remembering that, if you switch and fix, you lock in today’s low price for 12 months, protecting yourself against future price rises.
You should compare your options every year to make sure you’re on the best tariff possible. It’s estimated there are 11 million households (50% of all UK households) currently on a standard tariff who would be impacted by this cap, but they and other households could save far more by taking action to switch today. Our research shows that 99.88%3 of customers on an SVT could make a saving by switching.
How the price cap affects household energy bills
What you pay for your energy depends on the network charges in the region you live.
The price cap differs by region based on this although as at a national level, there is always a cheaper switchable tariff in each region4.
When there is reduced demand, this triggers a fall in the wholesale prices paid by our energy suppliers – Ofgem lowers 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, and as energy prices are at a three year low, substantial savings remain available to those who switch.
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 £2865 on your energy bills when you compare energy tariffs with MoneySuperMarket.
Getting a quote only takes a few minutes - just pop in your postcode and tell us about your energy usage, we’ll scour the market to find the best deals for you, and show you how much you could save by switching with us.
You’ll be able to compare quotes from across the market, from the Big Six to smaller companies as well as ‘green’ energy suppliers and 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.
Sources and methodology
All energy price cap figures are sourced from Ofgem, where comparisons have been made to the number of cheaper tariffs in the market or savings against the price cap this refers to MoneySuperMarket tariffs as of 8 September 2020.
51% of customers that applied to switch via MoneySuperMarket could save at least £286.50, June 2020.
On 1 April 2020 Ofgem decreased the Typical Domestic Consumption Values (TDCVs) for electricity to reflect continued decreases in electricity consumption, TDCV’s for gas remain unchanged. The new values are factored in to the default tariff price cap and prepayment meter cap level therefore the caps announced prior to this date may not be directly comparable.
1 All price cap data provided by Ofgem.
2 Tariffs switchable via MoneySuperMarket as at 8 September 2020.
3 99.88% of customers on a default standard variable tariff can save by switching with MoneySuperMarket, as at 30 July 2020.
4 Regional price caps calculated from average SVT values.
5 51% of customers that applied to switch via MoneySuperMarket could save at least £286.50, June 2020.