The Ofgem price cap explained simply, refers to limits placed by the government department on how much suppliers can charge you for home energy. On 1st April 2021 this energy cap will rise to £1,138 for standard dual-fuel energy tariff holders, and £1,156 for prepay meter customers.
The energy price cap was introduced in 2019 by Ofgem as a way to help ensure fairer energy prices for consumers who might not be taking advantage of the cheapest deals on the market (you can normally get these by switching suppliers).
In this worst case scenario, the price cap provides a hard limit to the amount energy providers can charge customers per unit of energy. However, it’s worth explaining that this capped price is often far from what might be considered competitive when comparing household energy suppliers.
How much you pay depends on how much energy you use, but the price cap is designed to prevent you from being overcharged for what you do use.
Who does it protect?
Reviewed every six months, the cap protects those on ‘default’ tariffs, such as standard variable tariffs and pre-pay customers.
Default tariffs are often the basic tariff offered by an energy supplier. People are usually on these tariffs because they have stuck with the same provider for years out of loyalty, and have not switched energy suppliers.
Default and standard variable tariffs are poor value and often much more expensive than fixed tariffs which you can renew or switch every year or so.
Why are energy prices set to rise?
In February 2021, after a rise in the market price for gas and electricity, Ofgem announced that they would be increasing the energy price cap.
From 1st April 2021, it will increase by £96 a year for 11 million households on a standard dual-fuel energy tariff in Britain, and £87 for 4 million prepayment meter customers.
Price of the energy price cap explained
The Ofgem energy price cap is now £1,138 for default tariff holders and £1,156 for prepay customers (April 1st 2021).
Customers on standard variable tariffs are paying much more than consumers on fixed-term contracts. If you are not on a cheap fixed-tariff or your energy deal is ending soon, you should start looking to switch energy suppliers. By shopping around for better energy deals and switching suppliers, customers could save over £100 a year, and protect themselves from any price rises.
How to save money on energy bills
If you’re worried about the rising cost of gas and electricity, you might be looking for ways to lower your utility bills.
Long term: Smart meters, better insulation, or a modern a-rated high-efficiency boiler can reduce the amount of energy you consume, and are all good ways to save money on gas or electricity bills.
Short term: The quickest and most cost effective way to avoid overpaying on household bills is simply to switch your energy supplier 🔌
You can do this by using energy provider comparison sites to seek out the best deals, however this can often become confusing and time consuming, and time is money!
How much can I save switching energy suppliers?
Energy providers often give their best prices to new customers, charging more for the same service once a tempting introductory rate expires and the customer fails to switch or renew.
We calculated that customers who switch energy suppliers with Plum could save at least £140 and when it only takes 2.5 minutes to switch with Plum…
That’s equivalent to being paid £56 per minute 🤑
How Plum can help you lower bills
Plum automatically analyses payments to your current energy provider and identifies if you’re being regularly overcharged, so there’s no need to navigate complicated price comparison sites.
You’ll be notified if there’s a better deal available, and Plum can switch your supplier for you in 2–3 minutes with just a few taps in the app 📲
No need to handle confusing comparisons, or even deal with your old provider in most cases (because breaking up can be hard) 💔
You can also visit our Lost Money tab within the app at any time for a better deal on home energy, broadband, car insurance and loans.
Learn more about how Plum can help you make the most of your money.
For all the latest Plum news and discussion, head to our Plummunity Forum, or follow us on Instagram and Twitter.
What is Ofgem?
Ofgem stands for the Office of Gas and Electricity Markets. They are a non-ministerial government department with a role to protect consumers from being overcharged for their energy use and are working towards delivering a greener, fairer energy system.
If you’re looking for more ways to save money, you might want to see if you can lower your broadband bills. Read our earlier article on how to get cheap fibre broadband or find specific advice for Vodaphone, EE, Virgin, BT, TalkTalk, Post Office, Plusnet, 3, Zen, Utility Warehouse, O2, Three Home.