Ofgem has announced that energy prices will be capped at £1,042 from October 1 2020. That’s £84 less than the current cap of £1,126, and will come as welcome news to millions of people across the UK who are on a standard variable tariff or prepayment meter.
However, if you’re paying anywhere near that amount for your energy, you could actually save three or four times that by switching to the best energy supplier in your area.
The energy price cap is updated twice a year by Ofgem. The industry regulator was able to push the price cap down further this summer, thanks to a fall in wholesale energy prices over the last six months.
This will benefit millions of households as we approach winter, claims Ofgem chief executive Jonathan Brearley. “They can also reduce their energy bills further by shopping around for a better deal,” he added.
What is the Ofgem price cap?
The Ofgem price cap puts a limit on how much you can be charged for units of energy. The quoted price of £1,042 is the maximum amount that an average home would pay if they use the average energy consumption, which is 12,000kWh of gas and 2,900kWh of electricity.
Of course, if you use twice as much energy as the average home, your bills will still be double the price, for example.
What does the Ofgem price cap mean for me?
If you’re on a fixed-rate tariff then you won’t be impacted by the price cap, because these are usually below the limit already. If you’re on an expensive, standard variable tariff that charges you the maximum cost per unit, though - and millions of people are without realising - you’ll see your bills drop slightly in-line with the price cap. And if you’re on a prepayment meter, you could see a £95 annual saving as the cap falls to £1,070.
Will it save me money?
The Ofgem price cap will save households that are on the most expensive standard variable rate tariffs around £84 a year. But even with the price cap, those homes are still over-paying by hundreds of pounds.
For example, if you live in the East of England and you’re on an expensive variable tariff, you could save £388.70 if you switch to the best energy deal available in August. If you live in North Scotland, you could save £286.04 a year by switching to the cheapest fixed deal possible in August.
Do I need to do anything?
You don’t need to do anything with the price cap - it'll be applied automatically by your supplier from October 1 2020. If your tariff has changed in a way that could disadvantage you, or if it’s no longer available, your supplier will write to you.