Energy regulator Ofgem has on Friday confirmed that the energy price cap can rise by 80.06% from October. This means the average household annual bill will go from £1,971 to £3,549.
It will affect around 24m households in England, Scotland and Wales. It will run from October 1 until December 31 when it will be adjusted once more. But what is the energy price cap and who is affected by it?
What is the energy price cap?
Ofgem, which regulates energy supplies, introduced the price cap in January 2019 to try to safeguard households from paying too much for their power. It limits what you can be charged for both the amount of power you use as well as a standing charge which covers the cost of connecting homes to the national grid.
However it doesn't cap the total bill - the figure will change depending on how much you use. So while the £3,549 it the amount the average household will be charge this could be more or less depending on your actual usage. For people on pre-payment meters their average bill is set to rise still further to £3,608.
Does the price cap affect me?
According to Ofgem the price cap applies if you’re on a default energy tariff, whether you pay by direct debit, standard credit or a prepayment meter. If your supplier has stopped trading and you are switched to a new supplier you are likely on a price capped tariff.
It won’t apply if you:
- are on a fixed-term energy tariff
- have chosen a standard variable green energy tariff Ofgem has exempted from the cap.
It advises people to contact their supplier to check if they are on a default tariff.
How often is the price cap reviewed?
Previously the price cap was renewed every six months however this has now changed. It will now be reviewed every three months.
Ofgem says this is so it can pass on any changes more quickly to customers.
Can the cap go down as well as up?
If the cost of the price of gas and electricity goes down then the price cap should fall as well. However under current conditions it is being predicted it could rise further. Peter Smith from National Energy Action has already warned: "Households are going to be hit again at the beginning of January - the height of the heating season and right after Christmas, already an expensive time."
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