The current energy crisis is causing significant disruption, and affecting the tariffs energy providers can offer. For all the most recent information, read our article on the current energy crisis and what to do about soaring costs.

The energy price cap will rise from £1,834 to £1,928 a year from January. This is the amount a typical household will pay for their energy bills per year.

As winter approaches, energy bills remain high and continue to place pressure on households battling steeper costs.

Here, we explain what the energy price cap is, how it works, and why it was introduced.

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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.

Energy bills for the average household were capped at £2,500 a year until July under the government’s Energy Price Guarantee, which was installed to temporarily replace Ofgem’s skyrocketing energy price cap. The energy price cap is now back in force. The government also offered a £400 energy rebate last winter to ease soaring costs, but this won’t be given to households this winter, when bills are expected to remain eye-wateringly high.

The average unit price for dual fuel customers paying by direct debit has been limited to 27.35p/kWh for electricity and 6.89p/kWh for gas, including VAT, since 1 October. Average standing charges are currently 53.37p per day for electricity and 26.62p per day for gas.

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.

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.

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How can you beat energy price rises?

Unfortunately, steep wholesale energy prices combined with the fact that many energy suppliers have gone bust, mean that for now it’s still unlikely to be worth signing up to a fixed rate tariff unless you want price certainty. There are a number on offer, but most are only available to existing customers, and they don’t offer a substantial discount on the energy price cap. Besides, no-one can be certain what will happen to energy prices over the next year.

You can find all the most recent information in our article on the current energy crisis and what to do about soaring costs.

You can however, 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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