About one million energy customers who are deemed to be vulnerable and so are given a discount on their gas and electricity should see their bills drop by an average of £102 a year, as the regulator extends a price cap. But many could actually save more by switching.
From today, almost one million people who are on their provider's standard variable tariff (SVT) and get the Warm Home Discount will be moved to a new 'safeguard tariff'.
For someone who uses a typical amount of energy, this is set to slash just over £100 a year off their bills. Ofgem's price cap is set at an average £1,031/year for typical use, while a big six SVT costs an average £1,132/year.
The extension of the safeguard tariff to some credit meter customers follows the cap being applied in April last year to all those who prepay for their energy.
What is the Warm Home Discount?
The Warm Home Discount scheme requires the big suppliers, by law, to help vulnerable customers in the UK pay for energy – giving eligible customers a one-off rebate on electricity bills of £140/yr.
It's mainly for people who get the 'guarantee credit' element of the pension credit benefit – known as the 'core group'. This group get the £140 rebate automatically applied to their electricity bills.
Some suppliers also offer it to what's known as the 'broader group' – those on low incomes or certain means-tested benefits. People in the broader group have to apply to their supplier to get the discount.
Only suppliers with more than 250,000 customers are obliged to provide the Warm Home Discount. These are the big six (British Gas, E.on, EDF, Npower, Scottish Power and SSE), plus First Utility, Co-op Energy, Utilita, Utility Warehouse, Economy Energy, Flow Energy and Spark Energy.
There are a few smaller suppliers which voluntarily offer the Warm Home Discount, such as Bristol Energy and Fischer Energy, but they don't have to apply the cap.
How do I know if I'll be moved onto the new safeguard tariff?
If you're on an SVT, get the Warm Home Discount and have a credit meter, you'll automatically be put on this new, capped safeguard tariff – you should have received a letter explaining this and letting you know your new rates.
If currently on a fix you WON'T be moved to the safeguard tariff.
You can't switch to the safeguard tariff during your fix, but you will automatically be moved onto it instead of the supplier's SVT at the end of your term. Always do a comparison to find the best deal for you though, using our Cheap Energy Club.
What will the price cap be?
On average the cap is currently set at £1,031/yr for a typical user – though it varies by region. It's set at the same level as the prepayment cap.
While £1,031/yr is the maximum suppliers can charge on average based on typical use, a number of firms have set their safeguard tariff below this level.
Here's what we know so far about the safeguard tariffs, and how they compare to the supplier's cheapest fix and standard tariff (none of the figures includes the Warm Home Discount):
Average annual cost – dual fuel (i)
|Supplier||Safeguard tariff||Cheapest fix||Standard tariff|
|First Utility||£1,030||£902 (iii)||£1,132|
|(i) This table is based on typical usage figures from Ofgem. (ii) This is our collective tariff, only available through Cheap Energy Club. Its cheapest open-market tariff is £1,016/yr. (iii) Only available through Cheap Energy Club or MoneySupermarket.|
How good is the price cap?
While the price cap may knock an average of £100 a year off vulnerable customers' energy bills, some could still save more by switching energy supplier or tariff.
Here's an example of how it could work if you're a typical user with E.on:
- On the safeguard tariff – you'll pay a typical £924/yr, so if you add in the £140 Warm Home Discount it'd be £784/yr.
- Switch to E.on's cheapest tariff – you'll pay a typical £908/yr, so if you add in the £140 Warm Home Discount it'd be £768/yr.
Alternatively, you could switch to Ovo Energy's cheap one-year fix for a typical £892/yr and get the Warm Home Discount on top of that – making it £752/yr.
Even if you don't want to switch suppliers you can save up to £68/yr just by asking your provider to move you to its cheapest fix – the only exceptions are SSE and Npower as their safeguard tariffs are currently cheaper than their cheapest fix.
It's worth noting that although the cheapest tariff on the market is £807/yr for a typical user from Outfox the Market, this may not necessarily be the best deal, as the cheapest suppliers generally don't offer the Warm Home Discount. This is the case with Outfox the Market.
The figures above will change depending on your region and usage.
Compare using Cheap Energy Club's Warm Home Discount filter
Our Cheap Energy Club shows you which suppliers offer the Warm Home Discount, and even lets you filter out any providers that don't offer it – so you can check if you'd be better off grabbing a fix or sticking with the safeguard tariff.
To compare, you'll need to update your tariff in the 'Edit Details' section of your Cheap Energy Club account, to let us know you're on the safeguard tariff and so you can compare against your new rates.
What if I have a prepayment meter?
If you're a prepaid customer, the rate you pay will already be subject to Ofgem's prepayment price cap. See our Bills to drop for three million prepayment energy customers MSE News story for more.
Will the price cap be extended?
Ofgem says it's planning to extend the price cap to another two to three million vulnerable households next year, though it has yet to consult on how it will identify these.
The price cap for vulnerable households is separate to plans for a wider cap on all SVTs, announced by Prime Minister Theresa May in October last year.
If the Government's proposed wider cap on energy prices is in place before next winter, Ofgem has said it won't extend the vulnerable customer price cap.
See our Energy price cap legislation revealed MSE News story for more information.