Uswitch comment on the price cap announcement
“This average £ 84 drop reduces the default energy price cap to £ 1,042 for standard tariffs – the lowest level since its introduction in January 2019. For those with prepaid meters, the drop average is £ 95. “Wholesale energy prices plunged earlier this year following the COVID-19 lockdown measures, and that is passing some of that reduction on to the energy bills of millions of households who benefit from variable tariffs. standard.
“There is a difference of £ 232 between the new October price cap level and the cheapest fixed deal on the market right now, so there is still a lot of money to be saved by removing a default tariff.
“With Ofgem having previously said the cap may have to increase in April if wholesale trends continue, locking in a 12-month fixed deal appears to be an even smarter choice for consumers. “Many people will be relieved to see their energy prices drop as temperatures begin to drop, and this change will alleviate some of the costly winter bills. “However, more savvy consumers will note that a change in October represents a seven-month lag since the huge drop in wholesale prices when the lockdown began – an inevitable fallout from the price cap system. “This summer has seen the cheapest energy deals since 2018 and millions of people are already benefiting from lower wholesale prices. “This reduction in the price cap is actually money off the most expensive tariffs in the market. Customers can choose to keep their energy contract and wait until October to see the reduction, or they can take advantage of these low prices today by switching products. “Ofgem also recommended that this temporary price cap remain in place next year, as some of the energy sector update and reform work has stalled under the lockdown. “So those on standard packages can expect to experience highs and lows every six months for a while longer. “The reduced price cap could also put more pressure on suppliers with tighter margins, so we will be monitoring the market for signs of this.”
Uswitch Explains: Information About Price Cap And What It Is What Is Energy Price Cap?
“The energy regulator Ofgem sets a maximum amount that suppliers can charge customers on default tariffs or prepayment meter tariffs. About 11 million people with default tariffs – which include standard variable tariffs – are covered by the default tariff cap, and four million customers are protected by the prepayment meter tariff cap.
Why do we have a ceiling price?
“Customers with prepaid meters found it difficult to access cheaper offers, and those who don’t shop find themselves stuck on their provider’s default rate, which is often the most expensive. The cap is temporary while improvements are made to the market.
Why is the price cap changing?
“The price caps are reviewed twice a year at fixed times. Wholesale energy prices have fallen due to reduced demand from industry during the coronavirus crisis, and Ofgem reflects those changes in the way it calculates the cap. ”
What should consumers do next?
“Uswitch’s data shows that there is a difference of £ 232 between the new price cap and the cheapest landline deals on the market. The price cap change means that bills will be lower for people on SVT, but many could save additional money by switching to fixed offers. ”
Is Price Cap Good For Consumers?
“Any reduction in the price cap will undoubtedly be good for consumers who stay on SVTs. But consumers need to be careful – it’s money on the more expensive rates already, while there are much better deals available that provide the ability to set rates. Consumers are also subject to varying volatility in cap levels, with Ofgem reviewing prices every six months. Uswitch would prefer the government and Ofgem to focus and deepen the formal support available to households that need it most. ”