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What is the energy price cap?
How does it work and how much is it?
The Government's 'Energy Price Guarantee' means no one pays the full amount under the energy price cap anymore. However, Ofgem’s price cap still controls the underlying energy prices. We’ve full info below on how the cap works, what it is and how it interacts with the energy price guarantee.
How does the price cap work? How much is it? Plus much more
The price cap was introduced on 1 January 2019 by regulator Ofgem, with the aim of preventing the millions of households on expensive variable tariffs from being ripped off.
It limits what you pay for each unit of gas and electricity that you use, plus it sets a maximum daily standing charge (what you pay to have your home connected to the grid). It's based largely on wholesale energy prices (those that firms pay) and applies only to providers' standard and default tariffs, which the vast majority of households are now on.
Due to record high energy prices, the Government stepped in and introduced the energy price guarantee, which provides a discount on the price cap for households. This means the Government is subsidising the cost of energy and limiting the amount suppliers can charge per unit of energy used.
Under the energy price guarantee, someone with a 'typical' amount of energy usage, paying by direct debit, would currently pay £2,500/year. But this is set to rise in April to £3,000/year, and will remain at this level until it ends on 31 March 2024. We've full info in our Energy Price Guarantee guide.
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