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Energy price cap explained

14

Nov

2018

The Price Cap

You may have heard the news recently about the new energy price cap. Starting on the 1st January 2019, the UK’s energy industry regulator, Ofgem, will enforce the new cap. But, what is the energy price cap? Who will be affected by it? And could signing-up for auto-switching save you even more?

What is the Energy Price Cap?

Ofgem’s new price cap will attempt to limit the maximum amount that energy suppliers can charge for the energy they supply.

The intervention is designed to tackle expensive ‘standard variable’ or ‘default’ energy tariffs. These are the costly tariffs that suppliers move their customers onto when their original deal comes to an end. If you haven’t switched your energy supplier in the last 12 months, then the likelihood is that you are on one of these expensive plans.

From the 1st of January, energy suppliers will have to cut the cost of these ‘default tariffs’ to the price set out in the new cap, or below it.

Who will be affected by the energy price cap?

Currently, a staggering 11 million UK households are on a standard tariff from one of the big six suppliers.1 That’s not great for those households’ energy costs, and the energy price cap is intended to bring down the cost of bills for these individuals and families.

Sounds like a good idea, but will it actually help or is it all hot air…?

Average savings under the price cap

It’s important to realise that the actual level of the new cap will still vary depending on how much energy you use. But the average level of the cap will be £1,136/yr for a typical household paying by direct debit. That equates to an average £75 saving under the new rule.2

Sounds better than a poke in the eye, but if you are on one of these standard tariffs you could save over £300 just by switching your supplier.3 And so, it’s important not to be lulled into a false sense of security that you don’t need to do anything now. 

Indeed, when you compare £300 versus £75, the savings from the new cap don’t seem particularly great.

And what about next year? Already, Ofgem has fessed up that the level at which the cap is set could be raised as early as April 2019.4 That’s right, your energy bills could go back up as soon as four months after the original cap is introduced. Meaning you will no longer save as much as first expected.

Save even MORE with auto-switching

Put simply, you could save more by switching energy supplier. The problem is that in order to avoid the expensive standard tariffs you have to remember to switch every year and that’s a bit of a pain.

So, you could be £300 better off for remembering to switch your supplier every year, or, £75 better off for doing nothing…

But, what if there was a way of getting the best of both worlds? Saving hundreds of pounds every year without doing a thing?

This is where auto-switching comes in. With Migrate, once you’ve signed up for free you’ll be automatically switched to the cheapest energy plan available to you every year. You’ll never end up on an expensive standard or default tariff again and you don’t need to do anything. 

More deals & More Savings

At Migrate, we work hard to make sure you have access to as many energy deals as possible. In fact, we can switch you to 40% more suppliers than other free auto-switching or price comparison services on the market.

That’s good news because by having access to more suppliers means you can choose between a greater number of potential savings that are on offer.

All you need to do to sign-up to Migrate is to give us a few details, pick your first switch, and after that we’ve got you covered.

Every year we’ll keep you on the cheapest energy plan available, and we do this all for free. We take a flat fee from the suppliers we switch you too and will never accept a commission for switching you to specific providers. 

References

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