The energy price cap fell from £1,690 to £1,568 from July, bringing bills to their lowest level for two years. This is the amount a typical household will pay for their energy bills per year.
However, bills are expected to increase again in October, placing further pressure on households battling steep living costs.
Here, we explain what the energy price cap is, how it works, and why it was introduced.
What is the energy price cap?
The energy price cap limits how much suppliers can charge consumers for their energy usage. The cap is normally set by Ofgem which reviews and usually updates it every three months to reflect factors like wholesale energy prices and distribution costs. Ofgem can also alter the price cap depending on market changes.
The price cap applies to default tariffs – or standard variable tariffs – which are often the most expensive plans offered by gas and electricity suppliers. However, the cap also affects customers on prepayment tariffs, which are typically more financially vulnerable. If you’ve never switched energy suppliers before, or have rolled off a fixed energy price, it’s likely you’ll have been automatically rolled onto one of these tariffs.
If you’re considering switching your energy provider, it’s worth doing plenty of research so you can be certain you’ve found the best possible deal to suit your needs. Comparison websites such as MoneySuperMarket, Uswitch and Compare the Market enable you to compare the latest energy tariffs, whether you’re looking for a fixed or variable deal.
Why was the energy price cap introduced?
The energy price cap was introduced to make sure people who never switch energy suppliers pay a fairer price for their gas and electricity. By setting a maximum charge rate, the cap limits the amount that energy suppliers can charge per unit of energy if you are on a default tariff.
How can you beat energy price rises?
Unfortunately, there are still relatively limited options available for those wanting to sign up to a fixed rate tariff for price certainty.
The majority are only available to existing customers, and they don’t offer a substantial discount on the energy price cap.
You can find all the most recent information in our article on the current energy crisis and what to do about soaring costs.
You may however, be able to make a number of simple lifestyle changes to help you save money on your energy bills, which could potentially save you up to around £700 a year. For example, turning your thermostat down one degree, draught-proofing your home and switching to energy-saving light bulbs can all make a difference to bills.
If you’re unable to pay your energy bills read our article What can you do if you can’t pay your energy bills? to find out where to go for help.
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