New cap will mean 11 million loyal energy customers on “default” tariffs pay a fair price for their energy
Around 11 million households who have stayed loyal to energy suppliers on poor value energy tariffs will pay a fair price from today (1 January 2019) thanks to the government’s price cap.
The cap will bring down the amount consumers have been overpaying to energy companies, including the Big Six, by £1 billion a year, starting this winter when households are typically using more energy to heat and light their homes.
It will remain in place until at least 2020, while energy suppliers and industry continue to work with the energy regulator Ofgem and the government to build an energy market that works better for all consumers.
Energy and Clean Growth Minister Claire Perry said:
“For too long, suppliers have failed to pass on any savings to their customers, who deserve to pay a fair price for their gas and electricity. Switching supplier is still the best way to find a better deal, but that doesn’t mean customers should be punished for their loyalty.”
Actual amount depends on usage
Following a consultation, Ofgem set the price cap level at £1,137 per year for a typical dual fuel customer paying by direct debit.
The amount customers will pay depends on how much energy they actually use, as the price cap sets a limit on how much suppliers can charge per unit of gas and electricity not on overall energy bills.
Ofgem will review the level of the cap every 6 months taking into account any changes to the actual costs of providing gas and electricity to energy customers. The first review will take place in early February coming into effect on 1 April 2019.
Commenting on today’s introduction of the cap, Gillian Guy, Chief Executive of Citizens Advice, said:
“The introduction of this cap will put an end to suppliers exploiting loyal customers. However, while people on default tariffs should now be paying a fairer price for their energy, they will still be better off if they shop around.
“People can also make longer-term savings by improving the energy efficiency of their homes. Simple steps, such as better insulation or heating controls, are a good place to start.”