Don’t celebrate energy price cap too soon
A new energy price cap came into force this month saving 11 million people an average of £76 a year.
But householders should not celebrate too soon, warned Midlands expert Ron Fox, as bills are likely to go up again as early as this April.
The move from January 1 means that typical usage by a dual fuel customer paying by direct debit on standard variable rate (SVR) will be billed no more than £1,137 a year.
“But a significant increase is likely to be announced early next month when the price cap is reviewed and will be introduced in April by the industry regulator Ofgem,” said Ron, of Noreus Ltd on the University of Keele Science Innovation Park. “That is despite the recent fall in wholesale costs.”
Gas prices have dropped by about a quarter since last September and electricity prices by about 15 per cent. But the cap is calculated over the whole of the past year when figures have risen considerably.
The Government brought in the price cap legislation after they concluded that inefficiency and excess profits by large energy suppliers meant that householders, particularly loyal and poorer customers on standard tariffs who didn’t shop around, were paying too much.
Savings depend on how much energy is used and how the bill is paid. The cap is on the unit price of energy, and the standing charge.
The cost of electricity – for those on default tariffs – is capped at 17p per kWh while gas is capped at 4p per kWh.
Dual fuel users will pay no more than £177 a year for a standing charge while electricity-only users will pay no more than £83, and gas users £94.
But a problem is that some companies have cut their lucrative fixed-rate deals priced at £1,000 a year or less as suppliers needed to make up some of the money lost because of the cap.
Consumer group Which? reckons the number of those offers fell by 90 per cent last year.
“Also,” said Ron, “it could be counter-productive, as it will lead to fewer people switching – where the potential savings are greater.”
But he added: “I would still encourage householders to shop around and it is so simple. Enter the tariff and energy usage from your most recent bill on a price comparison website which will suggest the cheapest supplier.
If they are happy they can organise the switch online and it should be completed within weeks with no interruption to supply.
“However,” Ron added, “there is one way to stop getting nasty surprises from energy companies is to swap to green energy using free sunlight.
“People can also make longer-term savings by improving the energy efficiency of their homes. Simple steps, such as better insulation or heating controls, are a good place to start.”
For more information on green energy and efficiency schemes contact Ron on 0845 474 6641.