The Energy Price Cap. What is it and will it stop people being overcharged?
Every household spends money each month on Gas, Electricity or both. Over half of all households in Great Britain are on what is called a “default tariff” or “standard variable tariff” because they have never switched or have not done so recently.
Why Loyal customers are usually automatically put on to these default deals by their suppliers after a period of time, even though they are usually the most expensive deals available.
There has been a lot of discussion in the media and in politics over whether this is fair. What has become clear is that more vulnerable people are more likely to be paying these higher tariffs so many commentators think of this practice as exploitative. In the past the energy companies have been told to make the difference in their prices clear to their customers and then leave it to them to decide if they want to switch to a lower price. Unfortunately, this hasn’t been working because people don’t want to have to shop around, they just want their loyalty to be rewarded with a fair deal.
Because of this growing political and public pressure the Energy regulator Ofgem has now set a “Price Cap” which is a maximum level that suppliers are allowed to charge for these bills (the final level of the price cap). They have set this cap at £1137 per year for a typical dual fuel customer paying by direct debit.
When the energy price cap comes in on January 1st 2019 suppliers will be forced to cut the price of all their default tariffs, including standard variable tariffs, at least to the level of this new cap.
Ofgem have done the maths and say that the cap will save customers who use a typical amount of gas and electricity around £76 per year on average, but some customers on the most expensive tariffs could save £120.
Of course how much you save yourself completely depends on how much energy you use, the price of your current tariff, whether you are using both gas and electricity and how you pay.
Ofgem and the government have been proud to tell everyone that the price cap will save about 11 million consumers in Great Britain around £1 billion in total.
So all that sounds great? If I am being ripped off for my energy I will automatically be put on to a good deal. Well done Ofgem right?
The energy price cap will mean that those people who are paying the biggest loyalty penalty and being ripped off the most will be ripped off slightly less. It doesn’t solve the problem at all. What we would love to see is loyal customers and vulnerable customers starting to get given the best deals available instead of the worst ones. That seems a lot more fair doesn’t it?
As it stands, those households affected by the cap will still be able to save more money by challenging their supplier to move them to the best rate that is available or by shopping around for a better deal with a new supplier.
So our advice is to take control of what you are paying. If you are on a standard variable tariff then challenge your supplier using ismybillfair. Why save £76 when you could be saving £300!
Is your bill fair?
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