How Ofgem’s Price Cap Drop Will Save You Money on Energy Bills

As of April, the price cap will be reduced by 12.3 percent, resulting in a drop in annual bills for an average household using gas and electricity and paying by direct debit, from £1,928 to £1,690. It is important to note, however, that the price cap does not establish a total limit on energy bills.

The price cap simply sets a restriction on the cost per unit of gas and electricity, as well as the maximum daily standing charge. Therefore, the actual bill amount is determined by individual energy usage. The main price cap figure serves as an illustration of what a consumer with average energy usage might expect to pay.

Renowned financial expert Martin Lewis recently explained on Twitter that, starting from April 1, for every £100 a direct debit user spends on energy, they will only pay £87.70. While this represents an improvement, it is anticipated that prices will decrease further in July. Nevertheless, overall energy prices still remain comparatively high, nearly double the cost prior to the crisis.

Martin Lewis also imparted a money-saving tip on energy bills, as reported by The Mirror. He suggested that switching to the Eon Next Pledge tariff could result in approximately 3 percent savings compared to the price cap for the first year, provided that payments are made through direct debit and a smart meter is employed. He emphasized that this option is an advantageous decision for those planning to remain under the price cap.

Moreover, Martin Lewis predicts the potential emergence of more competitive deals from energy suppliers come April. This is due to Ofgem’s decision to eliminate the “Market Stabilisation Charge,” which has hindered many companies from offering lower-cost deals to switchers. The removal of this charge implies that if consumers switch energy providers, the new provider will no longer be obligated to compensate the old one if they had previously offered a cheaper deal due to a decrease in energy procurement costs.

Nevertheless, Ofgem has opted to uphold the prohibition on “acquisition only” tariffs for another year. Martin Lewis emphasizes that this regulation ensures that energy companies extend the same deals to current customers as they do to new ones.