What is the energy price cap?

By now, most of us will have heard about the energy price cap. Dare we say we’re getting a little bored of hearing about it?!

Well, it isn’t the most exciting topic of conversation, so we don’t blame you BUT it is important.

So, as part of our mission to educate our readers on how they can better heat their homes and businesses, here it is in a nutshell:

What is the energy price cap?

Ofgem (the energy regulator) has described it as a “backstop” protection from the government.

Now, before you start reminiscing about games of rounders in the playground, here’s what that actually means, hopefully, this will be child’s play!

• The cap applies to people who default onto their supplier’s basic energy tariff, with Ofgem calculating the cap level that suppliers must apply.

• It applies whether you pay by direct debit, standard credit or with a prepayment meter.

It WON’T apply to you if you are on a fixed-term energy tariff or have a standard variable green energy tariff that Ofgem has exempted.

You can check what you are on by contacting your supplier or checking your bill.

OK, but what does the price cap actually do?

In a nutshell, it limits the rates a supplier can charge for their default tariffs but it doesn’t cap your TOTAL BILL. This will change depending on how much energy you use.

Ofgem is monitoring suppliers to make sure they stick to the new limits with regard to their default rates and the price cap has just been lowered by the new PM Liz Truss.

In the meantime, here’s a nifty little graphic from Ofgem which hopefully explains it:

Remember, these rates are averages and vary by region, payment method and meter type. You should contact your supplier for your rates, as you should if you are struggling to pay your bills.

Tags: News.