Ofgem raises energy cap – here's what that means for your bills

A recent review of the energy cap will have consumers seeing higher bills, but will still protect some from being overcharged

Gas bill
(Image credit: iStock)

Around 11 million British households on standard variable – or default – tariffs will see an increase in their energy bills from April, after Ofgem, the energy regulator, raised price caps. This new cap means that these households will have around £117 a year added to their existing energy bills. 

The price rise comes after Ofgem reviewed the energy cap that was introduced in January in order to protect consumers from being overcharged. As it stands, the cap has just been increased from £1,137 per year to £1,254 per year. 

This is potentially bad news for households who were paying just under the threshold, although the rise will not come into effect until April, meaning that they at least shouldn't see an increase to winter bills.

Ofgem, which sets maximum energy prices that can be charged to those who are on default tariffs, have said that any rise in the cap only reflects higher wholesale fuel prices: 'We can assure these customers that they remain protected from being overcharged for their energy and that these increases are only due to actual rises in energy costs, rather than excess charges from supplier profiteering,' says Ofgem's chief executive Dermot Nolan.

But what does that mean for us, the consumers, and what steps should we take? Here's what you need to know:

  • The cap is per unit of energy consumed, not per bill, so if you use more energy, you will still pay more;
  • There is a cap on the standing charge companies can charge, so you could still make savings; 
  • Ofgem claims that without the cap, we would all be paying more;
  • If your overall energy use is less than the capped amount, but you think it's too high, you may be better off switching to a cheaper, fixed deal;
  • The level of the cap will be updated again in October, with some indication that the cap could be lowered, so may only end up paying more for your spring and summer bills;
  • The four million households on prepayment meters will see a price cap rise, too, up by £106.
  • Our advice? Shop around and look to save money by switching suppliers.

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