Energy price cap increase – will your bills go up?

The default tariff cap, commonly known as the energy price cap, is a limit on the unit rate and standing charge that energy suppliers can charge customers. It is set by Ofgem, the energy regulator, and is reviewed twice a year. From April 2021, it increased from £1,042 to £1,138.

Q: Will I be affected?

A: The price cap applies to customers who are on a prepayment meter or a Standard Variable Tariff (SVT). This is the provider’s most expensive tariff, by a significant margin. In November 2020, the difference between the average standard tariff and the cheapest deal on the market was around £170 a year.

Q: How do I find out if I am on a Standard Variable Tariff (SVT)?

A: A SVT is a default tariff, so if you do not request a specific plan, the supplier will have placed you on it. For example, if you have never switched energy supplier, you are most likely on an SVT. If you had a fixed rate tariff plan that expired and you did not elect to switch to a new plan, you are most likely on an SVT. If you moved house and inherited the supplier of the previous tenant, you are most likely on an SVT.

If you do find that you are on the SVT, you are certainly not alone. The latest figures from Ofgem (2019), showed that, despite it being the most expensive option, 53% of UK households are on their supplier's default tariff (excluding those on prepayment meters). Around half of them have been on it for more than three years.

Check your bill to find the tariff you’re on (it often includes the name ‘standard’) or call your energy supplier if you’re not sure.

Q: How do I get a better deal?

A: To get a better deal, you need to shop around and switch, either to a new supplier or to a better tariff with your existing provider. The good thing about being on a SVT is that there are no exit fees, so you are free to switch today. The switch itself is an administrative process between the suppliers so that your energy service is never disrupted, and there will be no need for physical changes at your property, such as new pipes.

Q: What information do I need before I switch?

A: Before you begin the process of switching, you first need to understand the best available tariffs in your area, based on your energy usage and your personal preference. To help you do this, you’ll need the following information:

• Your postcode
• The name of your existing supplier
• Name of your current tariff
• Whether you are on a ‘dual fuel’ tariff (meaning you get gas and electricity from the same supplier)
• How you pay your bills (Direct Debit or when you receive your bill)
• If you pay different rates for your electricity depending on the time of day (you will have an Economy 7 or other ‘time of use’ meter)
• Your ‘annual consumption details’ (how much energy you used over the past 12 months, or your supplier’s best estimate)

If you cannot find the information you need on your bills, contact your supplier to ask. If they ask you if you are considering switching, then tell them that you are and you will be considering their best tariffs. Do not feel compelled to discuss details there and then, because until you have done all your homework, you won’t know if it is the best deal for you.

Q: How do I compare the deals available?

A: There are currently six major suppliers of gas and electricity that cover most of the UK (the “big six”) but there are over fifty smaller suppliers. The quickest way to find out which companies operate in your area and compare deals is to use a price comparison website. Make sure you are getting independent and unbiased advice by using sites that have signed up to Ofgem’s voluntary ‘Confidence Code’. You can find a full list on Ofgem’s website.

Some of these sites provide a phone number if you prefer to chat over the phone.

Very few energy suppliers sell door to door so exercise all the normal caution if someone arrives at your house unannounced and tries to sell you a tariff. Remember that they work for a particular energy supplier and so will not be able to give you impartial advice about deals available from other suppliers. You may just wish to thank them for the visit but do not feel under any obligation to commit to another visit or a phone call from a salesperson.

Q: How do I switch?

A: Your new supplier manages the switch for you. In some cases, you can start the process by clicking a link on the price comparison website, and the site will then contact the supplier on your behalf. For others, you may have to contact the supplier yourself, but it is a straightforward process.

Q: I’m not on a SVT, should I switch?

A: It’s always a good idea to check that you are on the best deal available. However, if you’re not on an SVT, it’s likely that you are on a tariff with an end date and if you leave before then, you will have to pay an exit fee. You should certainly find out when your tariff ends because you can switch on that before you get automatically put on your provider’s SVT by default.