This morning, Ofgem (Great Britain’s independent energy regulator) announced that the energy price cap is going to rise by 12% on 1st October this year, which unfortunately means household energy bills are going to increase. We know a lot of you will see this news and worry, so we wanted to clear up exactly what this means and what you can actually do about it.
For those who aren’t familiar with what the price cap is, it’s something that Ofgem set up to make sure energy companies aren’t able to over-charge their customers. Simply put, it caps the price suppliers can charge you on their default tariff. Ofgem make changes to the cap every February and August based on the latest estimated costs of supplying energy, all to make sure you’re only ever paying for legitimate costs.
This means that sometimes, if gas and electricity cost prices go down, the cap will go down as well so you end up paying less. But unfortunately, right now, global prices for fossil fuels, especially gas, are increasing at an unprecedented rate. Ofgem have had to reflect this in the price cap, ultimately to make sure energy companies are able to continue to supply energy to their customers and fulfil their wider obligations.
Because the cap is going up, it’s inevitable these costs will be passed down to the customers and that’s what a lot of the newspapers are focusing on today. But we’re not a fan of fearmongering, we think the better approach is to give you all the information (not just the scary headlines) because there are things you can do.
The main point to get across is, while the price cap limits the amount suppliers can charge customers on their default tariff, most suppliers do offer tariffs cheaper than this and, because they want extra business, they will offer discounted rates to new customers.
What this means is, if you stick with the energy provider you’ve always been with, you’re likely to be on a ‘standard variable tariff’ which means the price will definitely change in line with these fluctuations. What you’re better off doing is shopping around with new providers, looking for a ‘fixed rate tariff’ instead.
Don’t get us wrong, the price of these fixed contract deals will also be increasing on the back of higher wholesale energy prices, but by shopping around you’re going to benefit from the new customer deals so you may well still be able to save hundreds of pounds on your energy bill. Also, switching to a one or two-year fixed deal will also give you piece of mind because it’ll provide some protection from unpredictable global fossil fuel prices.
Your best bet to find the cheapest deal is to use a price comparison site so you can review all the options available. Try to do this before the new price cap comes into effect on 1st October because these websites will not factor in the higher default tariff rates until then so you should be able to save even more.
If you’re not in a position to switch provider, it’s still worth speaking to your current supplier because they’ll often be able to put you on a better deal than you’re on at the minute.