What Is the Energy Price Cap and How Does It Work?

Ofgem has recently announced that it will be increasing the energy Price Cap from £1,834 to £1,928. This means that from 1 January, electricity and gas customer's So Flex and So Flex Green variable tariff rates will change to reflect this. For an average household paying by direct debit for dual fuel this equates to a rise of £94 over the course of a year - approximately £7.83 a month. In light of this, we wanted to offer a refresher on what the Price Cap is and why it was introduced.

At the time of writing this, we’re delighted to offer So Lily, our new fixed rate tariff that will be BELOW the incoming Price Cap. If you’re a current customer you can login to your account here, and take advantage of this great offer. If you're not a customer, you can get a quote here.

What is the Energy Price Cap and how does it work?

Introduced on 1 January 2019 by Ofgem, the Energy Price Cap serves as a safeguard for households with variable tariffs, setting how much they pay for units of energy.

The Energy Price Cap was implemented to protect households from the volatility of energy prices, ensuring fair and reasonable charges for variable tariff users. It’s a dynamic figure that undergoes adjustments every 3 months based on market conditions. So if you’re on a variable tariff your prices will reflect this.

How will we communicate new prices to customers?

If you are on So Flex or So Flex Green, we will be in touch in mid-December communicating your new rates and standing charges. If you have any questions, please wait to receive these communications as they will provide all the details.

How does the Energy Price Cap work?

The cap limits the amount that a supplier can charge for their standard variable tariff. It’s important you understand this is not a cap on your total bill. The cap will affect the following:

• The standing charge (a fixed daily amount that is for operating costs).

• The price of each individual unit of electricity and gas.

Ofgem currently uses a figure of 11,500 kWh for a household’s annual gas use and 2,700kWh for annual electricity use. But each household is different and this should only be used as a reference point. Your usage will also fluctuate throughout the year due to seasonal usage.

Understanding how the Energy Price Cap works is crucial for consumers, as it directly impacts the amount they pay for their energy usage.

What is the current Price Cap?

The Energy Price Cap for the period 1 October to 31 December 2023 is £1,834 a year for a typical household who use gas and electricity and pay by Direct Debit. This will not affect any customers who are currently on our fixed rate tariff.

Should I switch my tariff?

We talked about the Price Cap continuing to rise in our previous blog, letting customers know it would be a smart choice to opt for our fixed rate tariff. Switching to a fixed rate tariff can bring numerous benefits and protect you from future price increases. Having a fixed rate tariff means you’re protected from price increases so long as you’re in contract. It also provides more stability when it comes to your monthly bills, as you can budget better knowing how much your rates will be for the duration of the contract.

Remember, our new fixed rate tariff So Lily, is below the Price Cap. If you’re a new customer you can get a quote here and save on your bills this winter.

If you’d like more information on the differences between fixed rate tariffs and standard variable tariffs, be sure to check out our previous blog here.

At So Energy, our commitment to financial prudence is reflected in how we manage our operations, investments, and resources. We prioritise sustainability and long-term financial stability to ensure we can continue providing clean energy solutions to our customers. Your trust in us is an investment we value. We're here to support you and help you through any challenges you may face. If you have any questions or concerns about the upcoming energy price change, please don't hesitate to contact us.

FAQs

• What is the current Price Cap? The cap is currently set at £1,834. As of 1 January, the Price Cap will increase to £1,928.

• Can my fixed rate tariff be higher than Ofgem’s Price Cap? It’s possible that Ofgem can lower the Price Cap to rates that are lower than your fixed rate tariff. However, given the Price Cap has just increased again it’s likely it won’t lower substantially that soon.

• Does the Price Cap mean I can use as much energy as I want? Unfortunately not. It’s a cap on how much you are charged for your rates, not your overall usage. If you use more, you’ll be charged accordingly for that usage.