Energy Price Cap UK to Launch This Winter
The prime minister has confirmed the launch of an energy price cap UK this winter. This energy price cap bill will affect 12 million households.
Under the Domestic Gas and Electricity Bill, energy regulator Ofgem will cap both standard variable tariffs (SVTs) and default energy tariffs later this year. These tariffs are currently some of the priciest rates in the market.
The Competition and Markets Authority (CMA) found that consumers have been overpaying energy suppliers an average of £1.4 billion a year.
How much is the energy price cap?
It hasn’t yet been confirmed exactly what the energy price cap amount will be. What has been established, however, is that the energy price cap bill could potentially prevent millions of household from paying high SVTs.
All energy suppliers’ SVTs will have the same energy price cap, but the cap amount may vary between:
- payment methods
- meter types
What are Standard Variable Tariffs (SVTs)?
SVTs are the energy supplier’s default or most basic tariff. If a customer hasn’t chosen a specific energy contract after their existing energy contract has come to an end, they will be switched onto an SVT by default. This is why it’s so important for energy consumers to switch to a new energy contract (and potentially save money in the process) when their existing contract ends.
At the moment, there are about 12 million UK households are currently on default SVT tariffs. Prime Minister Theresa May said: “For far too long older people, hard-working families and those on low incomes have been subject to rip-off energy tariffs. Our energy price cap will protect households from unfair price rises in time for this winter when people can feel the pinch more acutely. We know that the cost of living is still a challenge for some families and today marks an important step in helping people to keep more money in their pockets.”
When will the energy price cap UK come into play?
The energy price cap UK will be implemented from winter 2018 to winter 2018. The cap will be reviewed every six months to keep it in line with energy market rates.
What are the other applications of the Domestic Gas and Electricity Bill?
The new rules will also require the 15 biggest firms to take steps towards improving energy efficiency in over a million low-income households over the next three and a half years. The home energy efficiency scheme will require energy companies to supply energy efficiency measures to vulnerable consumers.
Are there any concerns about the energy price cap?
Benefits aside, the Domestic Gas and Electricity Bill is not without some concerns:
- The price cap could make energy tariffs more expensive if energy companies look to offset the revenue lost on lowering SVTs.
- Customers may no longer feel obliged to shop around for energy tariffs.
What is the effect of the price cap on suppliers?
As reported by The Guardian, German energy company E.ON will be cutting around 500 jobs in the UK. The company blames the needs to reduce costs on the upcoming energy price cap UK.
Customers should still look to switch and save
Even though the energy price cap will prevent people from paying exorbitantly high SVTs, energy consumers should still be proactive when it comes to energy procurement. At Smarter Business, we’ve found that our business customers can save up to 40% by shopping the market and switching to cheaper energy contracts. Households in the UK also stand to save by switching energy providers. Thus, Ofgem needs to make it clear that the energy price cap is a temporary solution and that the best deals on energy are to be found by comparing quotes from various suppliers.
Never be on an SVT again!
Smarter Business’ corporate energy procurement and management services ensure that our clients are always on the best energy deals for their needs. Contact one of our expert energy brokers to get a quote today.