What Do the Ofgem Price Cap Changes Mean for You?

On 6th August 2021, energy regulator Ofgem announced the latest changes to the energy price cap. In this guide, we’re going to be looking at the new changes and what they might mean for you.

What Is the Energy Price Cap?

The energy price cap is the maximum price suppliers can charge customers per unit of electric and gas on a standard or default tariff. It doesn’t limit how much you’ll pay on your energy bills, just the rates you pay for your energy. It is designed to protect customers from overpaying their bills and is reviewed every six months.

What are the Latest Changes to the Energy Price Cap?

On 6th August, Ofgem announced that they would be raising the cap by 12% to £1,277 for the average bill per year. This sharp increase of £139 is due

to the unprecedented rise in wholesale costs, meaning consumers who rely on the price cap to protect them from overpaying have actually ended up receiving an increase of £235 in prices during 2021 alone.

Whilst the intention of the price cap is to ensure customers pay a fair price, it only applies to the most expensive tariffs and doesn’t protect you against price fluctuations.

In fact, the cheapest tariffs on the market have been over £200 cheaper than the cap level, so it’s definitely worth taking the time each year to do some research to ensure you’re on the best tariff possible. Not to mention, if you switch and fix, you can lock in today’s price for 12 months, meaning you’re protected against future price rises for a whole year.

It’s estimated that 50% (11 million) of all UK households are currently on a standard tariff and will likely be impacted by the cap increase and are missing out on incredible savings by failing to make the switch. Consumers who have relied on the cap to keep their bills down will actually have ended up paying over £900 more than those who switched to a lower price deal following the introduction of the energy price cap back in January 2019.

What About Customers With Prepayment Meters?

For the four million customers on prepayment tariffs, the cap is set to rise by £153 (13%) to £1,309 from £1,156 on 1 October 2021.

Check if the Energy Price Cap Affects You

If you haven’t switched your energy tariff since last year or if your fixed-deal has ended, it’s likely that you are now on a default energy tariff which is price capped.

However, if you're not sure if your energy price is being capped you can call your supplier to check.

How to Make the Switch

It's simple to switch to a cheaper tariff by using an energy comparison site such as Money Supermarket, Energy Helpline and Uswitch - all you need is your postcode, the name of your current supplier, and the name of your current tariff.

You’ll be able to compare a range of quotes from across the market and once you have chosen the deal you want, switching takes just a few minutes. After you’ve switched, you should be on your new tariff within 21 days.

You can find a list of Ofgem-accredited price comparison websites here which meet Ofgem’s Confidence Code of Practice or alternatively, you can use the Citizens Advice energy comparison service.