Your energy bill could soon be cheaper thanks to a new price cap - this is when it comes in

Friday, 7th February 2020, 1:40 pm
Updated Friday, 7th February 2020, 1:44 pm
Are you on a standard variable tariff? (Photo: Shutterstock)
Are you on a standard variable tariff? (Photo: Shutterstock)

Millions of homes will see the cost of their energy bill fall this year, as a new price cap is introduced across the UK.

The new rules mean households on a standard variable tariff for gas and electricity will see their bills drop by an average of £22 per year.

Falling tariffs

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The energy price cap was first introduced on 1 January 2019 to protect households that are on expensive default standard variable tariffs. Often the priciest deals on the market, such tariffs cost families hundreds of pounds more every year.

As of 1 April, the tariff will drop from £1,179 to £1,162 for the summer period.

The pre-payment meter cap will also drop from £1,217 to £1,200 per year, for the same six month period, meaning households will make a £22 saving.

Households will see their bills drop by an average of £22 per year (Photo: Shutterstock)

15 million people to benefit

A collective 15 million households are set to benefit from the price cap changes, according to the government regulator, Ofgem.

Ofgem said the reduction reflects a fall in wholesale energy prices between August 2019 and January 2020.

However, while customers can look forward to making a healthy saving, the cap is just per unit of energy - not on the total bill. This means that customers who use more energy, will still pay more than those who use less.

Jonathan Brearley, chief executive at Ofgem, told The Mirror, “The default price cap is designed to protect consumers who do not switch from overpaying for their energy, whilst encouraging competition in the retail market.

"Suppliers have been required to become more efficient and pass on savings to consumers. In its first year, the cap is estimated to have saved consumers £1 billion on average on their energy bills and switching rates have hit record levels.

"Today’s announcement is further good news for the 15 million households covered by both price caps who will see their energy bills fall in April. Households can reduce their energy bills further by shopping around for a better deal."

Ofgem is due to carry out a review for the Secretary of State this summer on whether the market conditions exist for the default price cap to be lifted, or be extended, past 2020.