Revealed: The regions where you’ll pay most for energy under Ofgem price cap
Energy prices for those on standard tariffs are likely to vary more between different parts of the country after the introduction of Ofgem's price cap next month, MoneySavingExpert.com can reveal - with households in the South West set to pay an average £62 a year more than those in Yorkshire.
The price of gas and electricity has always varied depending on where you live, and which of the 14 energy 'regions' you fall within. Customers on a big six firm's standard tariff in the South West currently pay an average £49/yr more than those in the cheapest region, the East Midlands.
But our analysis reveals that the energy regulator's new price cap, which comes into effect on 1 January, will vary in impact in different parts of the country. In London it's set to save big six standard tariff customers an average £95/year, while those in the South West are likely to save just £71/year on typical use. As a result, the price gap between the cheapest and most expensive regions is set to widen.
Don't wait for the cap to save on your energy bills – you can likely slash them by £100s a year NOW by doing a full comparison on our free Cheap Energy Club.
Why do energy prices vary by region?
The price you pay for energy depends on a number of factors, one of which is where you live. England, Scotland and Wales are collectively split into 14 regions, with each provider selling energy at a different unit rate in each region. (It works differently in Northern Ireland, where there is a single rate per tariff - see our Northern Ireland Energy guide for full info).
Sometimes unit rates can be similar across regions, but often they are very different. A key driver is the different costs to providers in supplying certain areas, for example the charges they pay to use the local gas pipes and electricity wires. Supply and demand can also play a part, with some suppliers choosing to set lower prices in certain regions where they're particularly keen to attract or retain customers.
This regional variation is the reason you're usually asked for your postcode when searching for energy deals, so the correct rates are compared. Our Cheap Energy Club will automatically show you the best deals in your area.
How does my region compare?
Here's a map of the different energy regions in England, Scotland and Wales - most will be able to see at a glance which region they're in, but if you're still unsure you can use this postcode checker.
How will prices change under the energy cap?
We've crunched the numbers, looking at the average prices regionally for those on a standard tariff with a big six firm - British Gas, EDF, E.on, Npower, SSE or Scottish Power. Nationally some 54% of households are on one of these usually-pricey tariffs.
We've then compared this in the table below to the cap set in each region by Ofgem, so you how potential savings vary. Don't forget though - you'll nearly always save much more by switching - for example, the cap in the South West is £274/year more than the current cheapest deal on the market.
Energy prices region-by-region
|All prices are average annual costs based on Ofgem's typical consumption values of 12,000kWh gas and 3,100kWh electricity, paying by monthly direct debit. (1) Calculated using the current standard tariffs from British Gas, EDF, E.on, Npower, SSE and Scottish Power.|
As the table above shows, the gap between the cheapest and most expensive regions is set to widen after the Ofgem price cap comes into effect.
Currently customers in the East Midlands region pay the least for a typical big six tariff at an average £1,196/yr, compared with £1,245/yr in the South West - a difference of £49/yr. Yet under the upcoming price cap, customers in the South West will be charged a typical £62/yr more than those living in the new cheapest region, Yorkshire.
'Penalised for living in the "wrong area"'
MoneySavingExpert.com deputy editor Guy Anker said: "The regional variations highlight what is a postcode lottery whereby some are harshly penalised simply for living in the ‘wrong area’.
"It’s vital anyone on a standard tariff urgently checks if they can get a better deal before the bitter cold hits, and these figures shine an even brighter light on the huge sums many waste by sticking with expensive tariffs.
"A price cap may be coming, but while it makes standard tariffs fairer, it doesn’t make them good. Millions could still save £100s per year by switching."
How will Ofgem's energy price cap work?
The cap will be in place from 1 January 2019. Nationally, it will be set at an average £1,137/yr for a typical household paying by direct debit, or £1,221/yr for non-direct-debit households, though as the table above shows, it's the price cap in your region which really counts.
It's worth noting these figures are NOT a cap on the total amount you pay, but rather a cap on the rate charged. The cap on your annual bill is linked to usage, so the figures in the table above are based on someone with typical annual usage of 12,000kWh of gas and 3,100kWh of electricity. Someone with higher usage would see a higher cap - use less and your cap will be lower.
The level the price cap's set at will last only until the end of March 2019, when it will be reviewed, and it's predicted to then rise to a new higher level for the next six months. It will continue to be reviewed twice a year until 2020 when Ofgem will recommend on an annual basis if it should continue, up to 2023.
The cap applies to standard variable and default tariffs, but not fixed rate tariffs.
What does Ofgem say?
A spokesperson for Ofgem told us: "Ofgem’s methodology to set the level of the default tariff price cap is designed to reflect the underlying costs of supplying electricity and gas.
"The level of the cap varies by region, mainly because of regional variations of network charges which reflect the cost of transporting energy for each region.
"Thanks to the price cap, customers on default tariffs will save around £76 per year based on a national average when it is introduced on 1 January.
"The price cap saving will vary by region because some suppliers are currently setting regional price differentials in a way that doesn’t reflect their costs based on our methodology for the price cap.
"However all customers on default tariffs will still make significant savings on average regardless of where they live."
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