Check your energy deal as price cap is set to drop
ON OCTOBER 1, it is almost certain the energy price cap rate, for all but those on pre-pay meters, will drop by roughly £80/year.
This means 11 million households on these tariffs will get cheaper deals, but this doesn’t mean you’re getting a good price.
In January, the regulator Ofgem, launched the first price cap on standard tariffs. All the big six firms (EDF, British Gas, SSE, Eon, Npower and Scottish Power) follow it exactly – effectively we have regulated pricing. The January cap was set at £1,137/yr, which lasted until March 31, when it jumped to the current £1,254/yr.
The price is set to be reviewed now every six months. The next change is on October, 1 when it is predicted to be £1,171; less than now, but still 3% higher than the first cap. Here’s what you need to know
The price cap isn’t really a price cap
IT ISN’T the max anyone will pay – it’s just what the cap would be for someone who uses a typical amount of gas and electricity. If you use more energy your cap is higher; use less, your cap is lower.
Why it’s going to drop
WHILE Ofgem won’t publish the rate of the new cap until August 7, it has published the formula which dictates it; which is based on the average wholesale prices over six months and that period is almost over.
Using that, analysts at Cornwall Insight have predicted it’ll get £83/yr cheaper for someone on typical use – so it’s pretty safe to say it’ll drop somewhere between £75 and £90.
A fair price isn’t a good one
IF YOU haven’t switched in over a year, you’re likely on your supplier’s standard ‘price-capped’ tariff and that roughly means that you are OVERPAYING by around £300/ year – as the cheapest deals on the same usage are around £900/year.
How to do better Step 1:
Find out how much you’re overpaying via my cheapenergyclub.com or use any ofgem.gov.uk approved comparison site. There are a few things to be aware of. Your savings will be slightly overestimated. Price comparison sites can’t factor in the likely future price cap reduction.
Beware comparison sites hiding deals. For the sake of transparency my Cheap Energy Club defaults to all deals, not just the ones that pay it.
Switching isn’t usually a big deal – it’s the same pipes, gas, meter, safety – the only difference is price and customer service.
Step 2. The cheapest isn’t necessarily the best. Generally the cheapest providers are new firms with possibly little financial backing. So, scroll down the list to find names you know.
Big names also let you LOCK IN for a year at super-cheap rates – but only if you ask.
All of the big six energy providers currently have far cheaper deals than the £1,254/ yr price capped current tariffs. Eg. British Gas has a 1-year fix (new customers can ask for it) at just £990 – £260/yr cheaper (£180 once the cap drops).