Energy price cap changes – now’s the time to take control

Written by

Tim Greenhalgh

Posted on

August 13, 2020

Posted in

We’ve had a bit of rare good news in the past week with announced changes to the energy price cap that cuts bills for millions of households.

Energy regulator Ofgem says that from October the changes will mean “big savings” for around 11 million households on default tariffs and the 4 million homes on prepayment meters. The average bill reduction over the next year should be around £84.

Brilliant! It’s great to celebrate and share a little bit of joy after the gruelling trials of the past few months and the huge challenges ahead. The relief will be felt strongly by those who are hardest pressed right now and we can all celebrate the price cap kicking soon.

At the same time, we should all pause for a minute or two and take stock. It’s amazing that energy prices will be coming down but we all understand that over the next few years they are bound to rise again.

Reduce energy use

The pressure on prices from levies to cover climate change policy changes, rising network distribution costs and increased costs of energy generation will continue to increase – and there’s only one effective thing we can do about that. Reduce our energy consumption.

Simply by investing in a full range of LED lamps and bulbs throughout the home, you will reduce your lighting costs by up to 85%. The savings in electricity that you make will very quickly cover the initial costs and then you can sit back and relax, knowing that you will be saving money every time you switch on a light!

What’s more, quality LED bulbs and lamps are made to last. You can expect to fit and forget with easily a decade or more of regular use before even thinking about the need for replacement.

And as part of the move to turn your home green, small steps to balancing energy use and carbon emissions with lower costs and big benefits for the planet, it’s worth investing in low-flow shower heads and eco taps.

These not only save water, reducing consumption by 60%, they also cut the energy you use in heating and pumping the water.

Switching suppliers

Sure, we can switch suppliers – and the energy price cap mitigates some costs for a short time for those who have not changed their supplier and who are therefore most likely suffering from high charges.

But there are only so many times you can switch and get a real benefit.

The price cap puts a limit on what suppliers can charge per unit of energy. The cap was first brought in over a year ago, in January 2019, with the aim of massively reducing the number of homes paying too much for their energy.

It’s true that you do yourself no favours by just staying with a supplier out of habit over the years. They do not reward loyalty with cheap unit prices and the default tariff is always steep, and that’s why Ofgem acted.

How does the price cap work across the UK?

Prices vary in different parts of the country, so the price cap will vary too, depending also on how you pay for your energy. The headline £84 saving is an average for households who are on direct debit.

Your supplier will generally be buying energy months in advance on the wholesale markets and prices on these markets have been unusually low over the past six months. And Ofgem understands that suppliers will have made the most of low prices, so energy they will supply this winter is going to be at a cheap unit cost – to them.

Ofgem is determined that customers benefit from these exceptional market conditions and is reducing the price cap by £84 a year for a typical home. People with prepayment meters will see the cap fall by £95 a year. But millions of us on these standard tariffs will continue to pay much more – up to 21% – for our energy, compared with cheapest rates.

Also, wholesale energy prices are rising again now. Which means that our bills will rise in the future.

So, the advice is switch once and keep an eye out for the best deals but definitely make big reductions in your energy usage with quality LED lighting, eco shower heads and eco taps.

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