Energy price cap savings set to shrink

ANY savings households make from the new energy price cap will be wiped out by soaring wholesale costs ‘within months’, experts say.

Energy regulator Ofgem is set to confirm on Tuesday that the introduction of the Government’s flagship price cap policy will save 11million households on standard tariffs about £75 each on their annual bills from December.

However, this figure was originally calculated in September based on energy prices at the time and wholesale gas and electricity costs have risen since.

Energy insiders say the regulator will be forced to increase the cap as a result – possibly wiping out the entire benefit to consumers.

Its first review is expected to take place as soon as February with prices due to change in April. That means households could see their savings disappear within four months of the scheme’s launch.

Lily Green, head of research at switching service Look After My Bills, said: ‘It’s an open secret in the industry that the price cap at the level proposed by Ofgem will have to rise by £75 or even more at some point soon next year.

‘To introduce a cap and then increase it in a matter of months will be really confusing for families.’

The cap will apply only to standard variable energy tariffs. More than half of households are on these more expensive deals after failing to shop around for fixed tariffs. Ofgem declined to comment.