Exclusive Which? research has found that the upcoming energy price cap won’t help customers on some of the priciest deals on the market. And households could miss out on hundreds of pounds of energy savings if they fail to switch energy supplier once the cap is in place.
The price cap should be in force by the end of the year and aims to ensure you’ll pay a ‘fair price for energy’, according to energy regulator Ofgem. But even if the cap applies to your energy deal, you could still be up to £258 worse off compared with the cheapest tariff on the market.
Stay one step ahead of the price cap and switch energy deal now; use Which? Switch to compare gas and electricity prices to find the best deal for you.
What is the energy price cap?
The price cap will limit the daily standing charge and unit rate for the gas and electricity you use if you’re on your supplier’s default tariff (the deal you’re automatically placed on if you haven’t actively chosen an energy tariff).
This means that a medium gas and electricity user would pay £1,136 annually. However, your actual bill will depend on your usage, and the price cap will also vary depending on where you live as well as how you pay.
If you don’t pay your bills by direct debit you could be charged £83 more a year than people who do. This is because it costs firms more to have you as a customer.
Energy regulator Ofgem will set the cap and reassess it every six months; it can raise it if costs increase. The cap will be in place until at least 2020, and can be extended until 2023.
Will the price cap save you money?
The cap will force many of the biggest energy firms to reduce the prices of their default tariffs. Scottish Power’s customers will benefit the most, by £121 a year on average.
All of the ‘Big Six’ energy firms will have to reduce their default prices. But Ovo Energy’s standard variable tariff is already cheaper than the cap.
But even if the price cap cuts your bill, it doesn’t guarantee you a low price. Exclusive Which? research found fixed 98 energy deals that currently cost less than the proposed cap. At most, you could save £258 in a year by switching to the cheapest of them.
Pricey energy tariffs the cap won’t cut
Three in 10 dual-fuel deals cost more than the proposed cap currently – and they won’t be affected by it. That’s because they’re fixed (and not default) deals.
The priciest of these deals would cost a medium energy user £196 more than the cap per year.
If you’re on one of these deals, you have opted for a tariff that costs more.
Even if you need to pay an exit fee to escape one of these tariffs, it’s still worth considering switching, as you might still save money overall.
Cheap deals could disappear
Some of the Big Six firms might struggle to offer cheap deals if they’re not efficient enough after the cap is in place, Ofgem warns.
So if you buy your energy from a Big Six supplier and take care to choose its cheapest tariff, check if you’ll still save money. If not, you should switch.
Which? energy pricing analysis
Prices are based on a dual-fuel tariff available in all regions in England, Scotland and Wales paying by monthly direct debit, with paperless bills. Energy use is based on Ofgem’s annual average usage figures for medium users (12,000kWh gas and 3,100kWh electricity). Data is from Energylinx. Prices given are averages across regions, are rounded to the nearest pound and correct on 27 September 2018.