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If you’re on a standard variable rate (or default) tariff, or if you pay for your energy using a pre-payment meter, energy regulator Ofgem has set energy price caps in place to prevent you from being overcharged by your supplier for your gas and electricity supply.

In this guide, we’ll inform you about energy price caps, who can benefit from them and how to ensure you get the best deal for your household energy.


What Is An Energy Price Cap?

Energy price caps set limits on the amount your supplier can charge you per unit of energy (kWh). When market wholesale prices for gas and electricity reduce, regulators are keen to pass these price reductions on to customers to ensure that they are being charged fairly.

The price caps were introduced for standard variable rate tariffs on 1 January 2019 and are reviewed twice a year. The most recent cap in April was set at £1,127 per year[1].

If you were previously on a fixed-rate tariff and didn’t switch over to a new deal once it ended, it’s likely that your supplier placed you on a default tariff, which can be very expensive. The energy price caps are in place to prevent you from being significantly overcharged in this case, however, they will not replace the savings that could be made by switching to a cheaper, fixed-rate deal.

Customers with prepayment meters have benefitted from price caps since April 2017. Like the variable rate and default tariffs, the caps are reviewed every six months; it is currently set at £1,164 per year [1].

You should bear in mind that price caps can vary depending on where you live and the cost of transporting energy to the region in which you reside.

What about fixed-rate energy contracts?

No price caps are currently placed on fixed-rate energy tariffs as these already offer valuable deals. One of the main positive features of fixed-rate tariffs is that once you find a contract that you’re happy with, you can secure these rates for at least 12 months. This means that regardless of market activity or whether the price caps are changed, your rates will not increase throughout the term of your contract.

How Much Could You Save?

If your current energy tariff has rates that are higher than those set by Ofgem, it is likely that you will make savings as your suppliers will need to change the rates in accordance with the price caps. However, the price caps will not necessarily reduce your total bill as the amount you are charged will depend on the amount of energy you use. The price caps are applicable to unit rates, not your total bill; so, if you use a lot of energy, your bills will still be high. The BBC reports that with the price caps, dual fuel customers on a typical default energy deal could save between approximately £59-£120[2].

If you want to reduce your energy bills, the best way to do this is to find a cheaper deal and ensure that you use energy efficiently in your home.

Gillian Guy, the Chief Executive of the Citizen’s Advice told the BBC that the best way for homeowners to achieve long-term savings is by improving the energy efficiency in their homes using measures such as insulation or heating controls. Guy also stated that although the price caps may make prices fairer, shopping around for a cheaper deal is still the best option [2].

How Long Will Price Caps Be In Place?

The price cap for default or standard variable rate tariffs is set to remain for the rest of 2020. Ofgem have announced plans for the caps to be reviewed during summer in order to determine whether they should be lifted or extended. The price cap on prepayment meter tariffs is expected to conclude in 2020, by which time advances in the energy industry are predicted to enable better deals.

How Switching Energy Suppliers Could Help You Save

Although the price caps are put in place to prevent you from being overcharged, it is highly likely that you will save more on your energy bills by switching to a cheaper deal. Comparing the energy deals available on the market is the best way for you to find a suitable energy tariff for your home; hundreds of pounds in savings can be made! If you have a prepayment meter, it may be beneficial for you to switch to a credit meter where you pay for the energy you’ve used in arrears.

Here at Love Energy Savings, we can help you find a cheaper deal by comparing tariffs from a range of different energy suppliers. Try our free comparison tool today to find out which deals may be available.


[1] https://www.forbes.com/sites/forbes-personal-shopper/2020/06/08/best-gaming-monitors-for-2020/#3483f8993288

[2] https://www.bbc.co.uk/news/business-46720908