The energy market regulator will trim its price cap on standard variable and default tariffs from October, market watchers have predicted.
That’s according to a forecast by energy analysts Cornwall Insights.
The change will bring the cap to £1,170 annually for dual fuel customers with typical use and will force down the prices of hundreds of tariffs across the domestic energy market.
However, the level of the cap will still remain higher than when it was launched, at £1,137, in January.
The cap is reviewed twice annually, with adjustments in April and October, to reflect fluctuating wholesale prices, along with other costs faced by suppliers. Millions of consumers saw their bills rise by £117 when the cap was adjusted upward in April and nearly all suppliers hiked their default tariff prices in response.
However, at the time Ofgem said the price cap would ensure that future falls in supplier costs would be passed on to consumers.
“As we see wholesale costs begin to fall, we will also expect see the level of the cap to go down so these benefits are quickly passed on to consumers,” a spokesperson for the regulator said.
Although the fall in the cap will bring relief to consumers, they can save more by switching from a standard tariff to a cheaper deal.
The cheapest energy deal on the market, from Outfox the Market, is £846 a year. That’s £408 cheaper than the current level of capped SVTs and £324 cheaper than the revised version coming in October.
Customers are encouraged to compare prices and shop around to find the cheapest deal, rather than relying on the price cap.
In June Ofgem chief Martin Cave said the price cap, scheduled to last until 2023, had produced surprising reactions from both consumers and suppliers.
Contrary to warnings from consumer groups, the cap hadn’t caused consumer complacency or dampened rates of switching, he said. A record 660,000 consumers swapped suppliers in April, and although the pace of switching slackened in June, rates are still 10% above last year.
Meanwhile, suppliers haven’t raised their prices on fixed rate deals to offset the loss of funds from capped default tariffs.
Suppliers have been registering complaints about the cap, however, with Eon-UK chief Michael Lewis calling for it to be reviewed “as quickly as possible.”
“The price cap took a very large amount of money out of the industry at a time when we are expected to invest an enormous amount of money backing smart meter rollouts, the IT systems to enable that and into renewables,” he said in June.