Energy price caps are here to ensure you pay a fairer price for your energy and to protect against overcharging.
Are all energy tariffs price capped?
No. The price of your tariff is capped if:
- you use a prepayment meter
- get the government’s Warm Home Discountopen key term pop-up and/or
- are on a 'standard variable' energy tariffopen key term pop-up or a tariff you haven’t chosen (a 'default' tariff)open key term pop-up.
Energy price caps limit the price a supplier can charge you per kWH of electricity and gas (this is the unit measure which your bill is calculated from), not your total bill which will vary depending on how much energy you use.
If you are on a fixed-term energy tariffopen key term pop-up you have chosen, your prices will not be protected by the caps. These tariffs are more likely to be good value.
How do energy price caps work?
You could be protected by:
- a ‘prepayment’ price cap (sometimes called a ‘safeguard tariff’). This applies if you use a prepayment meter to pay for your energy. It lasts until 2020.
- a ‘default tariff’ price cap. This applies if you are on a ‘standard variable’ energy tariff or a tariff you haven’t chosen (a ‘default’ tariff). It started on 1 January 2019.
If you get the government’s Warm Home Discount and are on a 'default' or 'standard variableopen key term pop-up energy tariff, you were protected by the prepayment price cap until the end of 2018, after which you transferred to the ‘default tariff’ price cap.
Will my bills fall?
Yes, if you’re on a poor value deal. Suppliers must cut their prices to the level or below the caps we set. So if you’re on one of the tariffs currently priced above the cap, you will save money.
If costs to supply your energy fall, the cap makes sure suppliers pass on savings. If these costs rise, then you can have peace of mind that the caps ensure price rises are justified, and not the result of supplier profiteering.
Price caps won’t limit your total bill. This will vary depending on how much energy you use.
Your capped tariff under a price cap will depend on many things: how you pay (direct debit or standard creditopen key term pop-up), where you live and what type of meteropen key term pop-up you have. There are regional differences in the caps to reflect how much it costs to transport energy across the energy network to where you live.
Why have price caps been introduced?
The energy market is not working for all consumers and those who have not switched tariff or energy supplieropen key term pop-up are losing out. More than half of UK households have never switched or have only switched once, and are on more expensive ‘default’ and ‘standard variable’ tariffs as a result.
Ofgem and the UK government have introduced price caps so if you are less active in the market you don’t get left behind or pay an unfair price for your energy. We’re also working to introduce broader reforms, like faster switching times and smart metersopen key term pop-up, to make sure everyone gets a fair deal at all times.
It’s Ofgem’s role – as the energy regulator we’ve been given special duties by the UK government – to set the levels of the price caps. We do this twice a year. Our calculations reflect a broad estimate of how much it costs an efficient supplier to provide gas and/or electricity services to you if you use a prepayment meter or are on a basic 'default' or 'standard variable' energy tariff.
You don’t need to do anything to be price protected – your supplier must apply the caps. They can tell you if your energy tariff is covered by a price cap. They must also write to tell you if your tariff is changed in a way that could disadvantage you, or if the tariff you are on is no longer available.
Even if you are covered, you should still shop around to see if you can save more money by switching to a different tariff or supplier. It is likely there will be offers which could save you even more money on your gas and electricity than staying on an energy tariff covered by the price caps.