Revealed: How where you live affects what you pay for energy under the new price cap
Energy prices for those on big six standard tariffs are set to vary by £72/year on average depending on where you live once Ofgem's latest price cap level hits in October, MoneySavingExpert.com can reveal.
The price of gas and electricity changes depending on where you live and which of the 14 energy supply 'regions' you fall into. While the new price cap will mean all households on standard tariffs will see bills drop – by a countrywide average of £75/yr – the difference in prices between regions is striking.
Our analysis reveals that on typical use, someone in East Midlands would pay an average of £1,146/yr on big six standard tariffs from Tuesday 1 October, while on the same usage it'll cost £1,218/yr in south west England (SWEB region) – £72 more.
Yet whichever region you live in, you can slash bills if you're one of the 11 million households on standard tariffs by switching to the cheapest deals on the market. This ranges from a saving of £246/yr in northern Scotland (Scottish Hydro) to a huge £359/yr in the south west of England.
Do a full market comparison via our free Cheap Energy Club to see how much you could save by switching your energy provider.
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 split into 14 'supply regions', with each provider selling energy at a different unit rate in each region. (It works differently in Northern Ireland, where on most tariffs there is simply a single rate for usage 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. The main reason for that is the cost for providers in supplying certain areas varies across regions. 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 (you don't need to know your region, this is worked out for you). Our Cheap Energy Club will automatically show you the best deals in your area.
How do prices differ by region?
We've crunched the numbers, looking at the average prices regionally for standard tariffs for the big six – British Gas, EDF, E.on, Npower, Scottish Power and SSE – under the new price cap level, which kicks in from Tuesday 1 October. Nationally, some 54% of households are on one of these pricey tariffs, with the average cost varying by £72/yr depending on region – which is up £1 from the difference under the current cap.
Surprisingly, there are even significant differences between neighbouring regions. In the East Midlands, a typical household would pay £1,145/yr on a big six standard tariff, yet someone with the same usage in the Midlands region would pay £26/yr more.
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 much can I save in my region by switching?
In the table below, we've compared the average of the regional big six standard tariffs to the cheapest on the market for each region – based on Ofgem's typical use – to see how much people can typically save if they switched to the very cheapest deals (to find out exactly how much you'd save, use our Cheap Energy Club).
Savings in each region are huge and almost all can save well over £300/yr by switching supplier. However, for those in the Scottish Hydro region, savings are less than the rest of England, Scotland and Wales at £246/yr. However, this is still a significant saving on the average big six standard tariff.
(North Wales & Cheshire)
SWEB (South West)
|Prices correct as of Tuesday 10 September 2019. 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) From Tuesday 1 October 2019. (2) Based on the cheapest deal on the market.|
It's worth noting that the big six average price in each region is almost exactly the maximum allowed under the price cap level. If you're in the Southern or Swalec regions, the big six average is bang on the maximum allowed by Ofgem. In all other regions, the average is just £1 below the maximum.
'No matter where you live, you're likely being ripped off'
MoneySavingExpert.com energy & utilities editor Gary Caffell said: "These regional differences highlight a postcode lottery, where living in the 'wrong' area could mean you have to pay a lot more for your energy than those in neighbouring regions.
"However, no matter where you live, if you're on a big firm's standard tariff you're likely being ripped off. Don't be fooled by the headlines which say the price cap is dropping, millions could save £100s/yr more by switching, so urgently check if you can get a better deal before the colder weather hits."
How do I switch and save?
Switching is easy – it's the same gas, same electricity and same safety, all that changes is price and service. Yet as we've mentioned prices vary considerably by region. Not only this, they also vary heavily depending on how much energy you use. To find the best deal for you, the best thing to do is a full market comparison – you can use our free Cheap Energy Club to do this.
However, we know many of you are put off by small suppliers that you've never heard of before, which tend to offer the cheapest deals on the market. To help, you can use our 'big name comparison' to see the deals from the major players, or our 'great service comparison' for suppliers that performed strongly in our latest customer service poll.
How does Ofgem's energy price cap work?
The price cap limits the maximum amount suppliers can charge for each unit of gas and electricity you use, and sets a maximum daily standing charge (what you pay to have your home connected to the grid).
Currently, someone who uses a typical amount of energy on a standard or default tariff pays a countrywide maximum of £1,254/yr on average, but that is set to fall to £1,179/yr from Tuesday 1 October. It's worth noting these figures are NOT a cap on the total amount you pay. As the cap sets a limit on the price of each unit of gas and electricity, if you use more energy, you pay more, if you use less, you pay less.
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