MSE News

Energy Price Cap predicted to fall by less than expected – so should you fix now?

The Energy Price Cap, which dictates the rates most people pay for energy, is now predicted to fall by less than expected over the next year, according to the latest data from analysts Cornwall Insight. It means you'd pay on average 15% less than the current Price Cap over the next year – but you could save more than this by fixing now. We take you through your options.

Martin Lewis: 'Bad news – rates aren't looking to drop as much'

Sharing the news on Twitter, MoneySavingExpert.com founder Martin Lewis explained what the updated predictions mean for household bills:

The new predictions mean fixing your energy could save you even more

Based on the latest Price Cap predictions and factoring in seasonal usage, we think fixing is worth considering if the deal you're looking at is priced 15% less than the current January to March Price Cap – especially if you value certainty over what you'll pay.

  • Right now, it's possible to undercut the Price Cap with E.on Next's Pledge tariff. It promises to remain roughly 3% below the Price Cap for a year (so £50 a year at typical use), so when the Cap drops 12% on Monday 1 April, so too will this tariff. Therefore if you're going to remain on the Price Cap, it's worth considering this option.

  • The EDF Essentials 1yr Apr 25 fix is open to new and existing Direct Debit customers, but you must have or be willing to get smart meters. It's currently the market's cheapest standalone fix, averaging 18% less than the current Price Cap.

  • If you're an existing Ovo Energy customer, you may want to consider Ovo's 1 Year Fixed Loyalty tariff, which is 15% cheaper than the current price cap.

  • Existing Octopus customers could look at its Octopus Tracker tariff (if you're not already with Octopus, you can try switching to its standard variable tariff, then switch to this). Its rates change daily based on wholesale costs, meaning it's been substantially cheaper than the Price Cap in recent months.

    Alternatively, Octopus' electricity-only Agile tariff has rates that change half-hourly, based on wholesale prices – good for those who can shift their electricity use out of peak hours.

For a rundown of all your switching options, and for a full list of the fixed deals available, see our Should you fix your energy? guide.

How the Price Cap works

The Energy Price Cap sets a limit on the maximum amount suppliers can charge for each unit of gas and electricity you use, and sets the maximum daily standing charges (this is what you pay just for the facility of having gas and electricity). In practice, it controls what most households pay for energy.

The Price Cap changes every three months, and from Monday 1 April prices will fall due to lower wholesale energy prices in recent months – though standing charges will actually be increasing to £334 a year for Direct Debit customers.

To see what this means for your bill, use our 'What you'll pay from April' calculator. Or, if you're struggling, see our full Energy bill help guide for info on the all the support currently available.

Why the Price Cap predictions have changed

As Martin sets out above, the change is mainly due to a rise in wholesale prices (the rates energy suppliers pay) since February. These have slightly rebounded from their 30-month low earlier this year, Cornwall Insight said.

In addition, the new predictions also factor in the effect of two new costs being added to the Price Cap by energy regulator Ofgem – a temporary allowance to help suppliers meet the cost of customers who are struggling to pay their bills, and an extra charge to equalise bills for prepay meter users and those on other payment methods.

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