Government Extends Price Cap to End of 2021

The energy price cap, limiting the amount suppliers can charge households for default tariffs, has been extended until the end of 2021.

Launched at the beginning of 2019, the cap curbs the energy bills of 11 million households. It’s adjusted twice a year, in April and October, accounting for fluctuating supplier expenses. Following a dive in energy consumption in the spring and the resulting dip in wholesale prices, it fell to its lowest level yet, £1,042 a year for a typical dual-fuel household, at the beginning of this month.

The government estimated that in its first year of operation the price cap saved those households between £75 and £100, or a total of £1 billion.

The cap was originally scheduled to run until the end of 2020. However, Ofgem, the energy regulator, recommended in August that it be extended until at least the end of 2021 and combined with the separate pre-payment cap, which limits the bills of the four million households with pay-as-you-go energy meters and was also scheduled to lapse at the end of the year.

Today the Department of Business, Energy and Industrial Strategy (BEIS) confirmed that it would follow those recommendations.

Business and Energy Secretary Alok Sharma said: “The energy price cap has been vital in ensuring customers do not pay too much on their bills, which is why we are keeping it in place for at least another year.

“Switching energy supplier to find the best value deals is still the best way to save on bills, but this Government is determined to make sure all customers are treated fairly and get the protection they deserve.”

Ofgem will recommend if the price cap should be extended every year until 2023.

However, the energy price cap is significantly more expensive than many other energy deals on the market, and households can save more than £200 a year by switching from a default tariff to a new supplier.