ENERGY FIRMS REINED IN
Price cap should go some way to preventing worst energy company rip-offs
After years of political ping-pong, the price cap for gas and electricity prices has finally come into force. It will mean millions pay less for power, preventing the worst energy company rip-offs such as pushing up variable rates for those who do not switch.
These tactics especially hit older people and the less well off. But a survey shows most people have no idea whether it will benefit them.
For whether you rent or own your home, it’s not a guarantee of price savings. It will only apply to some tariffs. And many consumers could be lulled into a false sense of security – paying more than they should.
Some suggest suppliers will find ways around the cap.
The cap applies to “standard variable” energy tariffs. You can be on this if, like millions you have never switched supplier or reverted to this after a fixedterm deal. The cap generally does not apply to fixed-rates or green energy packages.
It should prevent the “average household” (a technical term from energy regulator Ofgem and the power industry) paying more than £1,137 a year. This figure will be revised every six months.
The next change – calculated in February and in force in April – will reflect price increases already in the pipeline.
Ofgem says the cap is good for the 11 million households – around one in three across the country – who have not shopped around and who have been punished for loyalty by higher tariffs.
It estimates typical customers could save £76 a year while those on the highest tariffs should be as much as £120 a year better off.
But according to a new survey from WeFlip, a switching service, only one in 20 know how much they might save while just one in four believes they understand how it works.
The message from WeFlip – and other switching services – is not to rely on the cap to get bills down.
Gillian Guy, Chief Executive of Citizens Advice, says: “The introduction of this cap will put an end to suppliers exploiting loyal customers. However, while people on default tariffs should now be paying a fairer price for their energy, they will still be better off if they shop around.
“People can also make savings by improving the home energy efficiency with better insulation and upgraded heating controls.”
Comparethemarket.com, says the average switching consumer pays £921 per year, £216 less than the cap rate.
Peter Earl, energy expert for the site, says: “We remain concerned the cap will create a false sense of saving and protection. It will also encourage inertia.
“The reality is shopping around and moving to the best fixed price deal remains the only effective way of keeping your bills low.”