January and February are usually the coldest months in the UK, which means many of us will be turning our thermostats up. In January 2019 the energy price cap also comes into effect – if you haven’t switched energy supplier in the last 12 months then this is likely to affect you.
What is the energy price cap?
The energy regulatory authority Ofgem announced an energy price cap in November. According to Ofgem, the price cap could help more than 11 million customers save £76** on their energy bills.
The final level of the price cap was set at £1,137 a year for customers paying by direct debit. This means energy suppliers will have to adjust their standard variable and fixed tariffs to a figure matching or below the cap.
** This is based on Ofgem’s calculations using the average dual-fuel standard variable tariff for the ten largest energy suppliers. It’s unlikely you will save exactly this number as it will depend on a number of other factors – those on the most expensive tariffs could save as much as £138.
When will the energy price cap come into effect?
Ofgem has stated that the price cap is effective from 00:01 on 1 January 2019. The £1,137 level will be in place until April 2019, and afterwards it will be reviewed every six months until 2020.
After 2020, Ofgem will give a yearly recommendation on whether the price cap should remain in place.
What does the energy price cap mean for you?
The energy price cap means consumers could save as much as £1bn on their energy bills. Ofgem says this could translate to around £76 per household for those on standard tariffs, and more than £120 in savings on the pricier energy plans.
However the exact amount you’ll save on your bills depends on:
The amount of energy you use
The tariff you’re currently on
How you pay for energy
Where you live
Whether your tariff includes gas, electricity, or both
Savings for big six customers
Based on the average cost of energy from the big six suppliers in the UK, here’s the potential difference in prices after the energy price cap comes into effect:
Big Six vs price cap
Price cap difference
What does the price cap mean for people on prepay tariffs?
Ofgem brought in a price cap for prepay tariff customers in April 2017, and as this is separate from standard tariffs prepay customers won’t be affected by the January 2019 price cap.
Will the price cap help me save on my energy bill?
The energy price cap set to arrive in January 2019 means your energy bill will probably go down. Even so, you may not end up saving as much as you could if you just rely on the cap alone.
Save more by switching
The best way to save money on your energy bill is by switching provider. Every time you switch you’ll have the opportunity to look for the best deal available at the time – however if you stay with your provider you may end up paying more for your tariff.
When you shop around on MoneySuperMarket, you can compare quotes from a range of energy providers. This way you’ll be able to find the a better deal for a better price – in fact, you could save at least £302.05 by switching from a big six company’s standard variable rate (SVR) to a different provider.**
It only takes a few minutes to give us a few details about yourself and your energy usage, then you’ll be given a list of quotes tailored to your needs. Once you’ve chosen and finalised your deal, it’ll take up to 21 days to make the switch – your supply won’t be interrupted, and no work will need to be done in or outside your home. Just send a closing meter reading to your old and new suppliers and you’ll be good to go.
**Based on 10% of customers who applied to switch via MoneySuperMarket, November 2018.