First of the big six cuts energy prices after price cap drop – but you could save £100s/yr more by switching
Big six supplier EDF has become the first energy provider to reveal its prices under the regulator's new cap on standard tariffs. It's reducing bills by a typical £16/year from April – just £1/year under the new price cap level. But don't be fooled, most could still save £100s/year by switching.
As expected, EDF has snuggled its prices right up to the maximum allowed under the new price cap of £1,162/yr for a typical user.
It's cut bills for about 1.3 million customers on its standard tariff, from £1,177/yr for a typical user, to £1,161/yr.
The move comes just days after Ofgem announced it was lowering the price cap on standard and default tariffs from Wednesday 1 April. The rest of the big six are expected to follow suit and shift their prices close to the cap.
Yet the £1,162/yr cap ISN'T the maximum anyone will pay, as it places a maximum charge on the rate you pay for gas and electricity – use more and you'll pay more.
And while EDF's cut means a saving of £16/yr for a typical household on its standard gas and electricity tariff, this is eclipsed by the £380/yr savings available for switching away to the absolute cheapest energy deal out there.
See what you can save on your energy bills by doing a quick full-market comparison via our free Cheap Energy Club.
You can save £300+/yr by switching
If you're on a standard or default tariff with EDF, you'll still be hugely overpaying when the new rate kicks in.
You're free to switch away at any time – suppliers can't charge exit fees if you're on this type of tariff. And now's a perfect time to do so as there's a big six price war raging.
EDF, E.on, British Gas and Scottish Power have all slashed prices over the past few weeks, and can only be beaten on price by a few small firms, which we know many don't want to switch to.
So how does the price cap work?
The 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 maximum of £1,179/yr on average, but that is set to fall to £1,162/yr from Wednesday 1 April.
The price cap is reviewed twice a year, with changes coming into effect in April and October. It's set to remain in place until the end of this year, with Ofgem able to recommend on an annual basis if it should continue, up to 2023.
While your rates will fall from April if you're on a standard or default tariff, your provider may not cut your direct debit immediately. And of course, if you use more energy than usual, what you pay will reflect this.
Why are prices falling?
According to Ofgem, the reduction in the cap is largely down to a fall in wholesale energy prices (what suppliers pay for gas and electricity), due to a strong supply of gas in the market.
However, other costs for suppliers, such as operating costs, network charges, and those relating to the smart meter roll-out and environmental schemes have increased, limiting the overall cap reduction. This is despite wholesale energy prices nearly halving since last September, which left many expecting a bigger cut.
What does EDF say?
We've contacted EDF for comment and will update this story when we hear back.