Households can save an average of £324 a year by switching to one of the most competitive dual fuel tariffs.
The gap between the best priced energy tariffs and the prices charged to those on standard variable or default tariffs has widened, according to Compare the Market.
The energy comparison site calculated that since October – when the price cap was set at £1,179 – the price of the most competitive energy tariffs available has fallen by an average of £73.
The average price for the top 20 cheapest available tariffs currently stands at £855 – meaning people on standard tariffs could be £324 better off by switching.
What is the energy price cap?
The energy price cap establishes a maximum price that can be charged per unit of energy, and a maximum that can be charged per day as a standing charge.
The cap is reviewed every six months and will rise or fall based on the costs that Ofgem calculates suppliers need to spend to get energy to your home.
But a survey by Compare the Market found that just 16% of households have heard of the price cap and can explain what it is.
Almost a third (32%) have not even heard of the price cap while more than half (52%) have heard of it but cannot explain what it involves. Just 5% of consumers can say what the current price cap level is.
Compare the Market’s Price Cap Update shows that since the introduction of the current price cap on 1 October 2019, prices in the market have dropped, with the average cheapest available dual fuel tariff falling by £73, from £928 to £855.
Even if the price cap was to fall by the equivalent amount, consumers would still be more than £250 better off by switching provider.
The price cap is next due to be revised on 1 April.
Households missing out on savings
The growing price gap between the most competitive tariffs and the prices charged to those on standard variable or default tariffs, means about 11 million customers on a default or standard variable tariff are collectively missing out on a combined £3.5 billion savings by not switching to a better deal.
Peter Earl, head of energy at Compare the Market, says: “Our research shows that the price cap has done little to safeguard those people on a standard or variable rate tariff. The more affordable prices available on the market to those that shop around clearly show that the level of the price cap is a rip off. Too few people are switching suppliers, leaving millions of people paying too much for their energy.
“Even if the next price cap drops to the lowest level since it was first introduced, people should not see this as a good value price to pay for energy – rather, it is the absolute ceiling of what they should be paying. It is evident from our findings that understanding of the price cap is low. We would encourage anyone on a standard or variable tariff to review their current provider to see if they can find a better deal elsewhere.”