Bills Fall for Millions as Energy Price Cap Is Lowered

11 million households on standard and default tariffs will see small savings on their energy bills after the price cap was adjusted downward yesterday.

Ofgem parred £17 off the cap from 1 April, bringing it to £1,127 per year for a dual-fuel household with typical use. The cap isn’t absolute, however: you may still pay more than that figure if your energy use is higher than average.

The new level of the price cap is less than the figure originally announced in April, but that’s due to an adjustment in how Ofgem calculates typical use, to reflect falling energy consumption, as our homes and appliances have become more efficient. The average savings of £17 are the same.

The UK’s largest energy suppliers moved to trim the cost of their standard tariff in line with the cap, but are all charging near the maximum allowed. Among the Big Six, EDF, E.ON, Npower, Scottish Power and SSE will now charge £1,126 a year for a dual-fuel household, while British Gas will charge £1,123 a year. 

But consumers shouldn’t be complacent that the cap will find them the best deal or rest on their laurels with the Big Six.  Smaller competitors are offering cut-rate deals, for up to £300 less than the price cap.

The level of the cap on pre-payment tariffs also fell, by £18 to £1,164 a year. However, that’s still around £200 more than the cheapest pre-payment tariffs on the market. Consumers can find even greater savings by switching to a credit meter and tariff if they’re eligible. Most suppliers will switch your meter for free.

But despite the adjustment of the price cap, many households will see their energy bills rise in the coming months, as the coronavirus lockdown forces them to work from home. 

Octopus Energy calculated that in the week before the lockdown was enforced, when working from home wasn’t mandatory but many employers had implemented it, energy consumption was up for 30% of households, with bills increasing by an average of £4.78 a week.

The supplier registered an even sharper increase in daytime energy consumption beginning Tuesday, 24 March, the first day of the government-enforced lockdown.

However, Increased domestic consumption wasn’t enough to offset a fall in commercial electricity use, as workplaces shut and manufacturing was paused. Energy consultancy EnAppSys calculated that electricity demand last Tuesday and Wednesday, the first days of the lockdown, was down 10% compared to a day in April last year with similar weather. 

Dampened demand led to a drop in wholesale electricity prices, but suppliers’ long-term hedging strategies mean consumers won’t see the effects of falling costs on their bills until later int he year and should prepare themselves for potentially months of increased utility bills during quarantine.