Government extends energy price cap until end of 2021 – but most can save £100s more by switching
The Government has confirmed that the energy price cap, which limits how much suppliers can charge for poor value tariffs, will be extended until the end of 2021 – and will cover those on prepayment meters.
Some 11 million households on pricey standard tariffs are covered by the price cap, currently £1,042/year for a typical dual-fuel (gas and elec) household.
The price cap is reviewed twice a year, with changes coming into effect in April and October. The cap was originally set to remain until the end of 2020, but regulator Ofgem recommended in August it be extended until at least the end of 2021 for standard and prepayment tariffs.
Today (Tuesday 20 October), the Secretary of State for Business, Energy and Industrial Strategy announced the Government will follow that recommendation and extend the price cap.
It means four million households on prepay tariffs will be covered by the price cap from January 2021. Currently, prepay households are covered by a cap imposed by the Competition and Markets Authority, which expires at the end of 2020.
However, even though the price cap means many households pay less for their energy than they otherwise would have, the current cheapest energy deals are about £200/yr less than the price cap on typical use (£90/yr less for prepay customers) – so for most, the biggest savings come from switching.
If you're on a standard or prepay tariff, use our Cheap Energy Club to find the best deal for you. Or let us do it all for you with our new Autoswitch service, where we pick your top tariff based on your priorities and switch you year after year.
How does Ofgem's 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).
Under the current price cap, someone who uses a typical amount of energy on a standard or default tariff will pay a maximum of £1,042/yr.
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.
Ofgem will recommend each year up to 2023 whether it thinks the price cap should continue.
You could still save £200+/yr by switching
Switching suppliers will save you £100s/yr more than relying on the price cap to keep energy bills down. If you're currently on one of the tariffs affected by the cap, you can't be charged exit fees, so you're free to switch away at any time. Average savings of £200+/yr are possible.
And with the cheapest deals for switchers creeping up in recent months, now's the time to grab a cheap fix, which lets you lock in today's rates (not the price, that changes with your use).
What does the Government say?
Business and Energy Secretary Alok Sharma said: "The energy price cap has been vital in ensuring customers do not pay too much on their bills, which is why we are keeping it in place for at least another year.
"Switching energy supplier to find the best value deals is still the best way to save on bills, but this Government is determined to make sure all customers are treated fairly and get the protection they deserve."
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