The energy watchdog Ofgem is raising the price cap that suppliers are allowed to charge customers
We asked readers what they wanted to know about the energy cap price rise. Hilary Osborne, our money and consumer editor, has the answers.
– Susan, Oxford
No, not while the deal lasts. The cap relates to the energy providers’ standard variable tariffs – these are the tariffs that customers are on as a default and have traditionally been more expensive than the fixed-rate deals on offer. The reason the energy cap was introduced was to stop these customers paying high prices because of their loyalty.
If you are on a fixed deal, you will carry on paying the same rate until the end of the term – unless your provider fails and you get switched to a new company.
Households are in a strange place at the moment because moving to a new fixed deal would mean paying higher prices. It is likely that if your deal ends soon you will be better off moving on to your provider’s standard tariff than going on to a new fixed rate.
– R Price, retired, Hampshire
The annual prices that are being widely quoted are for what a dual fuel customer with average energy use might expect to pay – they are not the caps themselves. So no household is currently guaranteed that their bills won’t go above £1,277. What is capped by the regulator, Ofgem, is the unit price that can be charged for gas and electricity (see above), and these apply to any supplier you use. If you do use an average amount of gas and an average amount of electricity, you can expect to pay around that figure.
According to Ofgem, average use is 12,000 kWh of gas a year and 3,100 kWh of electricity. British Gas publishes averages on its website that are based on different-sized households and properties – these suggest that one or two people living in a flat will use 8,000 kWh of gas and 1,800 kWh of electricity while four or five people in a five-bedroom house will typically use 17,000 kWh of gas and 4,300 kWh of electricity.
Currently you are very likely to be better off reverting to the price-capped deal. Lots of energy providers are quoting very high prices on their fixed rate deals – above even the new price cap.
– Padraic, 31, works for the NHS, West Yorkshire
The price cap varies around the country and according to how you pay for your energy. Customers who pay by direct debit pay the least, followed by those who are on prepayment meters, then customers who settle their bills with cash or a cheque. The caps are based on the cost of supplying the energy, along with other factors.
The cap for electricity paid for by direct debit averages out at 28p a kWh across Britain, including VAT. On top of that are standing charges (a fixed daily charge just for being a customer), capped at 45p a day. For cash and cheque customers the cap is 30p, while standing charges are 51p and for prepayment the unit charge cap is 28p, while standing charges are 50p. Direct debit customers in London pay the lowest standing charge, at 31p while customers in northern England and Yorkshire have the lowest usage cost at 26p a kWh.
The caps for gas follow a similar pattern. The average across Britain for direct debit customers is 7p, plus a standing charge of 27p, while cash and cheque customers pay 8p a kWh and 32p a day, and prepayment customers 7p and 37p respectively.
– Anonymous
The Treasury says prepayment customers who have remotely accessible smart meters will receive the money automatically. Those who have older prepayment meters will get a voucher issued by email or post, a cheque by post or a special action message to a retailer where they top up which will credit they key.
Customers who pay by cash or cheque will have their accounts with their energy provider credited in the same way as direct debit customers.
– Ana, London
The Treasury says this will not be an option – it says having an opt-out will complicate the process and delay money getting into people’s accounts. If you pay by direct debit this may not be an issue – you could make sure that don’t reclaim or run down any credit in your account so when bills go up to cover the £40 you will have the money.
It is not yet clear exactly how the energy rebate and repayment scheme will work but – probably because there are all kinds of potential problems around linking the clawback of the money to individuals or properties – the government has said it is expected to be through an increase in standing charges.
That option, which would add about 11p a day to standing charges, would mean for five years all brand-new energy customers would be paying for this year’s rebate.
If you are in the position where you can afford the £200 toward your bill now but are worried that you might struggle to pay £40 more over the next five years you could tuck away some cash now in a savings account to draw on at a later date. You won’t get much interest but as there is no interest on the loan that should not be too much of a concern.
– Julie Switsur, 80, retired, Kirkwall
Heating oil costs are not regulated by Ofgem, so aren’t included in the price cap – which could be why as you point out, this bit of your energy bill will not be subject to a payment.
Another reason is likely to be because the mechanism for helping households that the Treasury has come up with uses domestic and gas electricity providers to pay and recover the assistance. Arranging a £200 loan to customers will be harder than doing so for people with accounts with an energy firm, because the debt cannot be recovered through standing charges.
However, if you have an electricity account, you should benefit from the £200 payment through that.
Householders who use heating oil will be eligible for the £150 council tax discount – assuming they meet the criteria of living in a band A-D home in England.
