By Esmée Hardwick-Slack
The government regulator Ofgem has set the final level of the cap at £1,137 a year for typical dual fuel customers who pays their bills via direct debit. This means suppliers will have to cut the price of their default tariffs to the level of the cap or below it.
They have stated: “When the price cap comes into force suppliers will have to cut the price of their default tariffs, including standard variable tariffs, to the level of or below the cap, forcing them to scrap excess charges. The cap will save customers who use a typical amount of gas and electricity around £76 per year on average, with a typical customer on the most expensive tariffs saving £120.”
How much you save depends on how much energy you use, which tariff you are on, if you have both gas and electricity, and how you pay for your energy. The cap is measured per unit of energy, not on the total bill, meaning those who use more energy will still pay more than those who use less.
Ofgem plan to review the tariff in February, and adjust it in April and October each year. They have stated that the level of the cap is likely to rise in April next year, to reflect the higher cost of wholesale energy.
Steve Murray, energy expert at MoneySupermarket has said: “Unfortunately, any joy that long-suffering households feel today is likely to be short-lived. Ofgem is attempting to protect consumers by launching this cap with a £76 savings message, but it’s simply not sustainable. The cap will be reviewed again in February, when market forces look likely to dictate it will rise significantly.”
Ofgem will review the effect of the cap in 2020 and the secretary of state will decide whether to extend it by another year, leading to many believing it may not last long.
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