What does the energy price cap mean to you?


The energy price cap is the maximum amount a utility company can charge an average customer in the UK per year for the amount of electricity and gas they use, preventing companies from simply pass on cost increases to the consumer.

But the cap, set by regulator Ofgem and first introduced in January 2019, only applies to customers who benefit from a standard variable tariff, usually a supplier’s default and most expensive option. .

It does not protect consumers against global market fluctuations or limit an individual’s overall bill – if you use more than the “average user”, you always pay more.

The rate is reviewed every six months and the latest cap, announced on February 3, 2022, ushered in a 54% hike, meaning a sharp rise in household bills this spring.

As of April 1, 2022, the cap has increased from £1,277 to £1,971 for a household in average use. This means an increase of £693 per year for the average customer.

Prepayment meter customers also saw an increase of £708, from £1,309 to £2,017.

Jonathan Brearley, chief executive of energy regulator Ofgem, said: “We know this increase will be extremely worrying for many people, especially those struggling to make ends meet, and Ofgem will ensure that energy companies support their customers in every way possible. .”

The latest review on August 6, 2021 was itself a 12% or £139 increase on six months earlier and, worse news, Mr Brearley has since told the House Business, Energy and Industrial Strategy Committee Commons that he expects the cap to rise again in October, placing the cap “in the region of £2,800”.

Cost of living: how to get help

The cost of living crisis has hit every corner of the UK, pushing families to the brink with rising food and fuel prices.

  • The Independent asked experts to explain small ways to stretch your money, including managing debt and getting free items.
  • If you need access to a food bank, search your local council’s website using gov.uk, then use the local authority’s website to locate the nearest centre. The Trussell Trust, which runs many food banks, has a similar tool.
  • Citizens Advice provides free help to people in need. The organization can help you find grants or benefits, or advise you on rent, debt, and budgeting.
  • If you are experiencing feelings of distress and isolation, or are struggling to cope, The Samaritans offers support; you can talk to someone for free over the phone, confidentially, on 116 123 (UK and ROI), email jo@samaritans.org or visit the Samaritans website to find contact details for the nearest branch.

This latest development promises a disastrous winter for UK households as the cost of living is already soaring, with inflation now at a 40-year high of 9%.

Russia’s disastrous war in Ukraine has only aggravated the predicament in the UK and elsewhere, given that the aggressor is a key supplier of energy to mainland Europe.

The IndependentJames Moore likened the prospect of higher bills to “an arctic wind blowing through people’s personal finances”.

Chancellor Rishi Sunak has already announced £150 council tax rebates will be given to homes in Bands A-D and unveiled plans to offer a £200 rebate on bills, but he is under pressure to do so more.

Ecotricity boss Dale Vince was quick to call the Chancellor’s initial measures “far too little, far too late”.

Responding to the Commons, Labour’s shadow chancellor Rachel Reeves also called Mr Sunak’s plans a ‘buy it now, pay later scheme which drives up costs for tomorrow’.

The opposition is now pushing the government to introduce a one-off tax on North Sea oil and gas producers, who are among those who have benefited from steep price rises this year.

Mr Sunak could use the proceeds of a windfall tax to improve the earlier £200 reduction in energy bills and would seek to make the existing Warm Homes rebate scheme more generous.

Overall, the government is believed to be considering a spending package of up to £10billion, but that would still be insufficient, according to the Resolution Foundation think tank, which says £15billion is needed to help low-income people get through the crisis.

Addressing the upcoming squeeze in household finances on his ITV show earlier this year, ever resourceful money-saving expert Martin Lewis was, for once, forced to admit he was perplexed by the prospect to face such a dramatic increase in electricity costs, saying he was left “shaky” and “on the verge of tears” of frustration at not being able to help a single mother unable to pay her bills.

“There are a lot of people who can afford the increase and who won’t like it, but there are also millions of people who will be plunged into fuel poverty, who will be about to have a choice between warm up and eat,” he said. warns his audience.

As Ofgem himself did, Mr Lewis advised his viewers to speak to their provider about possible payment plans and suggested households check whether they are eligible for the hot house discount or payment winter fuel.

Since the cheapest energy prices on offer are usually around £200 below the energy cap, the usual recommendation is to switch suppliers regularly to ensure you get the best deal and keep the current price low for at least less than 12 months.

But the current state of uncertainty is such that even this piece of conventional wisdom is in doubt.

“Under normal circumstances, switching is a good way to break the price cap and save money. However, due to the unprecedented conditions in the energy market at the moment, we are changing the habit of a lifetime and let our customers know that changing may not be the right thing to do right now,” price comparison site Moneysupermarket advised its users.

Mr Lewis was broadly in agreement when he told subscribers to his weekly email: ‘It seems like most people shouldn’t do anything (not certain, I don’t have a crystal ball), it seems that only a few extreme cases should be considered fixing at this time, so when in doubt, settle for today’s cheapest price, which is the ceiling.


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