It’s important. The cap is the rule that stops you being ripped off when you buy energy for your home. And without energy…. there’s no light, luxuriating in a hot bath nor, dare I say it, Love Island.
So what price to put on that lot?
Think about it… without electricity you can’t watch Love Island. Credit: ITV.
Well, Ofgem — the energy regulator — has one. It’s £1,162 from 1 April — that’s for an average dual-fuel householder on a standard variable tariff — and it’s a modest £17 lower than the current limit. The cap is the maximum amount any supplier can charge you for your energy.
Useful and very important fact: the cap is calculated against the unit rate and standing charges for energy, so the ‘cap’ actually varies depending on how much you use. Don’t make the mistake of thinking you’ll never pay more than £1,162. You might — depending on how much power and gas you consume.
But here’s the thing. That new cap is still £200 a year higher than Pure Planet’s £962 equivalent price for 100% green electricity and 100% carbon offset gas for an average user.
£200. Right there for the saving.
So we did some maths. How much is that difference worth to people overall?
Since the Ofgem price cap was first introduced in January 2019, close to 10 million households on standard variable tariffs have paid an extra £232 on average for their energy compared to the Pure Planet’s 100% green energy tariff.
But by the time the cap changes in April the total amount they could have saved will be more than £2.3billion. And unless customers switch away from capped variable tariffs, this will rise to £3.3 billion by the time the price cap changes again in October.
£3.3 billion of energy savings — even after the regulator lowers the price cap for the second time.
But you’re thinking: that’s the difference to the cap — what about to other tariffs?
Guess what. Every time the cap changes, the Big Six move their prices to within a couple of pounds of the maximum allowed, knowing that millions of people won’t switch.
As a result, British householders lost out on more than £2.3billion worth of savings in 2019 and unless they switch away from these rip-off tariffs they will lose around a billion more in 2020.
So that’s why the cap is important. Yes, it stops you paying more than a supplier might want to charge you.
But it absolutely doesn’t mean you will be on a great value tariff.
Don’t be cap complacent, it might cost you a fortune.
Here are some more detailed numbers for those who like that kind of thing:
Data from Ofgem shows there are 9,669,782 households currently on Standard Variable Tariffs with the Big Six suppliers.
When the price cap was first introduced on January 1 2019 it was set at £1,137 per year for an average dual fuel household. It rose to £1,254 in April 2019. And in October it was dropped to £1,179.
Pure Planet analysis shows the Big Six — which includes British Gas, SSE, E.ON, EDF, Npower and Scottish Power — adjusted their SVT tariffs to stay within a couple of pounds of the maximum. Between January and March the average price across the Big Six was £1,133, from April to September prices rose to £1,254 and in October they again stuck to the cap, averaging £1,179.
During that same period Pure Planet cut its average price from £986 to £962. Pure Planet’s 100% renewable electricity and carbon offset gas tariff is £217 cheaper than the 1 October 2019 Price Cap and is currently £200 lower than the April 2020 cap.
Pure Planet was recently ranked among the top providers in the country for customer satisfaction and also named a recommended supplier by consumer champion Which?.
The figures assume Ofgem’s typical use of 3,100 kWh a year for electricity and 12,000 kWh a year for gas.
Source: Ofgem (correct as of January 2020) Number of domestic electricity customer accounts by supplier (excluding pre-payment customers): Standard variable, fixed and other tariffs (GB)
Source: Pure Planet