Energy prices drop as new price cap hits – but most will still overpay by £100s/yr
Millions of customers stuck on expensive standard tariffs should start to see lower energy bills this week as the regulator's new price cap kicks in, though most will still be massively overpaying – you could save £350+/year by switching supplier.
Some 11 million households on rip-off standard tariffs are set to see bills drop from today, as Ofgem's new price cap level comes into force. For a typical user, the maximum price is set to fall by just £17/yr.
The new cap of £1,127/yr is slightly less than the figure announced in February. This is due to a change in how Ofgem calculates 'typical use', with the average household's electricity use dropping – though the overall saving of £17/yr is unchanged (see Average energy use has fallen for more info).
This isn't the maximum you can be charged, though. The price cap sets a limit on the rates you pay for each unit of gas and electricity, so if you use more, you'll pay more. Plus, as the price cut is only a marginal decrease, you may not see a drop to your direct debit.
The price cap level for prepayment tariffs is also falling by £18/yr today, to £1,164/yr – still nearly £200/yr more than the cheapest prepay deals on the market.
If you're on a standard tariff, use our Cheap Energy Club to find the best deal for you.
You can save £350+/yr by switching
Once again, the big six have predictably priced their standard tariffs within a pound or two of the cap, so customers will typically save an average £17/yr under the new capped rates. In comparison, the cheapest deal on the market is a typical £776/yr – £376/yr less than the new average big six standard price.
Here's the new average standard tariff for each of the big six suppliers from today (Wednesday 1 April) based on typical use, paying by direct debit:
- British Gas – £1,123/yr
- EDF – £1,126/yr
- E.on – £1,126/yr
- Npower – £1,126/yr
- Scottish Power – £1,126/yr
- SSE – £1,126/yr
This is down from the previous big six average of £1,143/yr for a typical user.
As oil prices have plummeted, so have energy prices across the market, so it's a great time to switch, particularly with people now spending so much time at home.
And right now, we've got the cheapest MSE deal in nearly two years – from well-rated supplier Green Network Energy. It's a typical £773/yr, which is £350/yr cheaper than the new big six average. See our top picks to see how it stacks up for you.
It's only beaten by a few smaller firms, so do a full market comparison via our free Cheap Energy Club to find your winner if you want the absolute cheapest.
How does Ofgem's price cap work?
The price cap limits the 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).
The cap limits the price of each unit of gas and electricity, so if you use more energy, you pay more; use less and you pay less.
The price cap is reviewed twice a year, with changes coming into effect in April and October. It's set to remain until the end of this year, after which Ofgem will recommend on an annual basis if it should continue, up to 2023.