Over 11 million households could save up to £120 on their energy bills from January as a new price cap come into force

Published by Stephen Little on 06 November 2018.
Last updated on 06 November 2018

Big Energy Saving Week: Households lose £1,500 failing to switch in last six years

Millions of households could see their energy bills fall from next year after the UK energy regulator confirmed today that the new price cap will come into force on 1 January.

Ofgem says the cap will be set at £1,137 per year for a typical dual fuel customer paying by direct debit.

This means suppliers will have to cut the price of their default tariffs to the level of or below the cap, forcing them to scrap excess charges.

How much could you save?

The regulator says that than 11 million households could see their energy bills fall by £76 on average a year and as much as £120 on the most expensive tariffs.

The price cap is expected to save consumers around £1 billion in total.

The cap is based on a typical dual fuel customer paying by direct debit and aims to force energy companies to scrap excess charges for people on poor value default deals.

British Gas customers could save around £69 a year in total, according to Ofgem’s calculations.

Meanwhile, someone on the most expensive tariff with Scottish Power would save £121.

The savings for individual customers will depend on how much energy they use, the price of their current tariff, whether they have both gas and electricity and how they pay for their energy.

Dermot Nolan, chief executive of Ofgem, says: “The price cap will ensure that whether energy costs rise or fall suppliers are not feathering their nest and changes in energy prices will reflect the underlying costs to heat and light our homes."

He adds: “Consumers who want to cut their bills further should shop around for a better energy deal and while the cap is in place, we will continue our work to make this as easy as possible.”

Could the cap rise?

Ofgem says the price cap level will be updated in April and October every year to reflect the latest estimated costs of supplying electricity and gas, including wholesale energy costs.

The regulator adds that if wholesale costs keep rising it is likely that in February it will announce an increase in the level of the cap to take effect in April.

Stephen Murray, energy expert at MoneySupermarket, says: “That means we could be looking at three months’ gain and then 12 to 18 months of long term pain for people who do nothing and let the regulator control their bills.”

MoneySuperMarket says there are still 89 cheaper tariffs than the cap on the currently on the market.

Mr Murray adds: “Customers who switch to a competitive fixed rate tariff can save £200 or more on their annual bills right now as we head into winter.”

Richard Neudegg, head of regulation at Uswitch.com, says: “Consumers should not be lulled into a false sense of security - there is a very good chance that the price of standard tariffs will change three times over the next 12 months, and potentially for the worse rather than the better.

“Initial savings could be wiped out as early as April when rising wholesale costs may force the cap to increase, so standard tariff energy customers can only rely on three months of savings - averaging around £19 - before the cap potentially goes up.”

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Those of us who rallied to

Those of us who rallied to the call by Government and the 'green brigade' a few years ago and installed new energy producing technology have inherited a dreadful cold! The cost of running my Ground Source Heat Pump (GSHP) to generate electric energy is 3 x more than my actual domestic consumption. The small RHI grant I have received accounts for only 33% of the capital installation cost. Adding the cost of running my GSHP energy (18,000kWh/year) to my domestic use (7,000kWh) for all my heating and lighting for a 4-bed house, requires a total of around 25,000kWh per year. Most providers are reluctant to supply me with energy at this at this level (since they assume I am a business consumer) and those who do, will not provide special low rates at this level. Each 1p increase in supply rate costs me another £250!
I am fed up with all the focus and concern raised by fair deal organizations on the effect of increases to low or normal domestic consumers when NO-ONE is fighting the corner of thousands of consumers who, like myself, are at the mercy of all energy suppliers (who are laughing all the way to the bank!) Where is the concern and justice for us? The much acclaimed CAP will make no difference at all!
At present I am yet again switching suppliers to get the lowest possible rate, and these are only available on variable (not fixed) plans. The cheapest I can find is 'IGLOO' at 13.2 per kWh (plus standing charge), which totals almost £3,400 per year. When the variable rate increases without warning (which it will) I will be searching around again!

I was hoping you'd explain a

I was hoping you'd explain a little about how the cap works. Can I sit in a 25 room mansion burning gas and electric as much as I want and still only pay £1137 a year maximum?

Nanny state takes over to

Nanny state takes over to protect those too lazy to switch to a fixed price tariff each year. It will end up costing those who put the effort in to save to subsidise the lazy. It should be left to market forces, there are plenty of lower cost tariffs to choose if they just look.