The energy regulator, Ofgem has proposed an energy bill price cap of £1,136 a year for “typical usage”.
This follows Parliament passing the Government’s Domestic Gas and Electricity (Tariff Cap) Act, which became law on July 19 and gives Ofgem a duty and the powers to put the price cap in place.
Ofgem is currently working to have the price cap confirmed in November and for it to take effect by the end of December. It will then stay in place until 2023.
How much will households save on their energy bill as a result of the cap?
The amount households could save will depend on their energy usage and supplier but Ofgem has said that their proposal will mean 11 million households on default energy tariffs will save about £75 per year on average.
Consumers on default energy tariffs tend to use more energy than a typical household so their savings could be higher. Any households who buy their electricity and gas from different energy suppliers could also save more.
A typical consumer on the most expensive tariffs would save over £120. In total, the price cap would save consumers around £1 billion.
When the energy price cap is introduced, energy suppliers will have to cut their energy prices to the level of or below the cap, proposed to be £1136 per year for a typical dual fuel customer paying by direct debit, forcing them to scrap excess charges for people on poor value default deals.
Will the Energy Price Cap stay at £1136 until 2023?
No, the Energy Price Cap will be reviewed by Ofgem twice a year (April and October) to reflect the latest estimated costs of supplying gas and electricity. This ensures households who are covered will always pay a fair price for their energy.
Dermot Nolan, chief executive of Ofgem, said:
“Ofgem has made full use of the powers Parliament has given us to propose a tough price cap which will give a fairer deal to consumers on poor value default tariffs.
“Once the price cap is in place, all households in Great Britain covered by the cap will be protected from being overcharged for their energy. Consumers can have confidence that falls in energy costs will be passed on to them and if costs increase, Ofgem will ensure that any rise will be due to genuine increases in energy costs rather than supplier profiteering.
“Households protected by the cap will be able to save even more money by shopping around for a better deal. Meanwhile, Ofgem will continue with reforms which aim to deliver a more competitive retail energy market which, combined with protection for those who need it, works for all consumers.”
Default tariffs are usually the supplier’s most expensive option. If you are one of the 11 million currently on one then you could save more money by moving to a different energy tariff.
Compare energy suppliers through Energylinx and see what you could save today. You can compare energy suppliers on our website or by calling 0800 849 7077 and speaking to one of our energy advisors. Our contact centre is open Monday to Friday 9am to 6pm and Saturday 9am – 3pm.