Energy Price Cap - what is it & how does it affect me?

30 Apr 2019

Energy Price Cap

If you have been reading the papers or watching the news recently, there’s a high chance you have heard something about the Energy Price Cap, but what exactly is it, and how does it affect you?

We’re here to answer those questions!

What is the energy price cap?

If you have a pre-payment meter, benefit from the government’s “Warm Home Discount” or you're on a standard variable energy tariff (or a “default” tariff), you will benefit from the energy price cap.

Twice a year, Ofgem, the regulator of the energy industry, set a cap. This cap limits the highest possible price energy suppliers can charge per unit of electricity or gas, if you meet one of the above criteria.

For example, if Ofgem set the cap on electricity at 35p, energy suppliers cannot charge you more than 35p per single unit of electricity on a standard variable energy tariff. That figure is purely hypothetical but it helps you understand how the cap works.

The energy cap only affects your kWh charge (unit cost), rather than how much you pay per month or per year.

What this means is that if you use way more units of electricity than someone else in your area with the same type of meter and payment method, you will still pay more per month for energy, just not more per individual unit.

How do Ofgem calculate the cap?

Ofgem take in to account a number of different things when setting the cap. These include, but are not limited to:

  • The way you pay – be it a pre-payment meter or direct debit, this affects the cap.
  • Your geographical location – depending on where you live in the UK, your cap could be higher or lower than other areas.
  • The type of meter you have in your property – pre-payment meters, smart meters, single dual rate meters; they all make a difference.
  • Wholesale energy costs – the cost of energy to suppliers varies and this affects the cap.
  • Network costs – the cost of the wires, pipes and infrastructure required in your area to power your home.
  • Policy costs.
  • Operational costs – such as the costs the energy suppliers incur to provide you with energy. For example, billing costs.

What are Outfox the Market doing to help?

Many suppliers use the cap as a target, rather than a cap. What we mean by this is instead of trying as hard as possible to keep their energy costs less than the cap, they use the cap as an excuse to charge as much as they possibly can without exceeding it.

Here at Outfox the Market, we make sure we are way below the maximum figure.

What are the numbers?

Contrary to popular belief, wholesale energy costs have recently gone down, meaning energy suppliers have the opportunity to extend their own saving to their customer base.

On April 1st, the energy cap increased by 10% and every single big six energy supplier immediately increased the price of their variable tariff by 10% to match.

All price comparisons are based on an average of 3,100kW of electricity usage and 12,000kW of gas usage per year. The price cap based on those figures is now £1,254.00.

Outfox the Market would charge you £883.76 for the same amount of usage. Eon, one of the big six, would charge £1,221.16 and SSE, another one of the big six, would charge £1,221.03.*

Is this a permanent solution?

No. Ofgem’s website (www.ofgem.gov.uk) says:

“The cap is temporary while we introduce other reforms, such as faster switching, and smart meters designed to make the market work better, and to protect consumers.”

Other than being the cheapest energy supplier in the UK, are there any other reasons to switch to Outfox the Market?

Yes, indeed there are. Not only are we the cheapest, we also supply 100% renewable, clean electricity. Powered by UK based offshore wind farms, our electricity is environmentally friendly and designed to save our planet from the harmful and damaging carbon emissions given out by the use of fossil fuels.

We also provide the best of British customer service, with live web chat and no more long on-hold times when you call us.

Why not switch to Outfox the Market today – the cheapest energy supplier in the UK?

*Based on the East Midlands area