The energy regulator, Ofgem has proposed an energy bill price cap of £1,136 a year for “typical usage.” It’s calculated that the cap will save around 11 million households on default deals about £75 on average, although the amount households could save will depend on their usage and supplier.
The planned cap will be confirmed in November, take effect at the end of December and stay in place until 2023.
When it’s introduced, gas and electricity suppliers will have to cut their prices to the level of or below the cap. The aim is to force energy companies to scrap excess charges for people on poor value default deals.
More than half of all households in Britain are on default tariffs – normally a standard variable deal – because they have never switched or have not done so recently.
Even those that have switched in the past are often automatically put on more expensive default deals when they come to end of fixed-term contract deals.
Although the average customer on the standard variable tariff is set to save about £75 on average, someone on the most expensive tariff could save more than £120, Ofgem has calculated. But the saving depends on which supplier you are with and whether you pay by direct debit or not.
A British Gas customer, for instance, would save about £69, according to Ofgem figures. But someone with Scottish Power, which currently has the most expensive default tariff, would save about £121.
Even with the price cap, it’s still advisable for customers to keep a regular eye on their energy bills and contemplate switching.
Stephen Murray, energy expert at MoneySuperMarket said: “You might think Christmas has come early with the savings mooted in today’s announcement of the price cap level, but you’d be missing the bigger picture.”
“There are more than 100 tariffs available right now which are cheaper than the proposed level of the price cap at £1,136. That means switching today could save you £250 or more, and there’s no need to wait for a price cap that would actually save you on average £75.”