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Energy Price Cap The energy price cap explained

Find out what the energy price cap means for you and whether switching makes sense under current market conditions.

REMEMBER: the price cap figure is based on the maximum a supplier can charge if you are an ‘average user’, so if you use more, you pay more..

Last updated 4 October 2021 • 8 min read

What's the latest price cap and what does it mean for me?

  • The latest cap was announced on 6th August, with Ofgem raising the level by 12% to £12771 for the average bill
  • An unprecedented rise in wholesale costs means this is £139 higher than the previous cap, meaning that consumers who are relying on the price cap to ‘protect them from overpaying’ have received a £235 rise in prices in 2021 alone

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 standard variable tariff (SVT), which is usually a provider’s 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 or default tariff when your fixed period ends.

The price cap does not limit your total energy bill, the figure above is just an indication for the ‘average user’ – if you use more you pay more.

On 6th August 2021, Ofgem’s latest price cap was announced. An increase in wholesale energy costs as global demand recovers means the new cap has risen sharply by £139. The new cap is set at £1277 per year.

The price cap for prepayment tariffs is also increasing by £153, to £1,309 per year.

“The electricity and gas we use in our homes is the same used by our neighbours, friends and family, yet so many people don’t check to see if they could move to a better deal and pay less. Over recent years it has been easy to switch to a cheaper tariff with also maybe better service and from a supplier who sources electricity from renewable sources.

“However at the moment (September 2021) the energy market is seeing unprecedented price rises which may mean staying put for the time being is the best thing to do. Run a comparison on Moneysupermarket and if you can’t currently save, then leave your email and we will let you know when you can.”

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 introduced in January 2019 and is reviewed every 6 months. While it is intended to ensure customers pay a fair price for their energy, it is only a cap on the most expensive tariffs and does not safeguard you against price fluctuations.

The cheapest tariffs in market have been mostly £200 or more cheaper than the price cap level and it’s also worth remembering that if you switch and fix, you lock in today’s price for 12 months. That means you’re 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 are likely to be impacted by this cap.

How the price cap affects household energy bills

What you pay for your energy depends on the network charges in the region you live.

 
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Region

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Price cap

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Cheapest tariff

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Saving

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When there is increased demand, this triggers a rise in the wholesale prices paid by our energy suppliers – Ofgem increases the price cap to ensure these costs are passed on to consumers.

Should I switch energy suppliers right now?

In normal circumstances, switching is a good way to beat the price cap and save money.

However, due to unprecedented conditions in the energy market right now, we’re changing the habit of a lifetime and advising our customers that switching might not be the right thing to do at the moment.

We’d recommend that you run a comparison on our site now. If you find you can’t save, just leave us your email and we’ll get in touch when you can.

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 6th August.

1 All price cap data and volume of UK households on a standard tariff provided by Ofgem.

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