The energy price cap that's not a price cap - how to reduce your bills

Ofgem’s news that the energy price cap that’s not really a price cap would be rising 10 per cent this autumn triggered the usual heated response from the usual quarters.

The “cap”, which is set by the UK energy regulator, affects the maximum price paid for each unit of gas and electricity used in some 27 million homes across England, Scotland and Wales. The 10 per cent hike on the previous quarter will impact bills from October 1 to the end of December. It means that households using an average amount of gas and electricity and paying by direct debit will have to cough up £1,717 a year, adding around £12 a month to an average bill.

Ofgem announced it is hiking its price cap by 10% from the current £1,568 for a typical household in England, Scotland and Wales to £1,717. | Canva / Getty

The fact that this autumn’s figure is £117 cheaper than last October’s cap will be cold comfort to many, still struggling with higher prices for just about everything. And, of course, that limit on unit costs does not cap total charges. Use an above-average amount of energy and you will pay an above-average bill.

However you cut it, the news is pretty grim for millions of us heading into the colder months, particularly as the hike comes as some support for bills has been withdrawn.

The rise in the price cap, Ofgem notes, is the result of higher prices on the international energy market, with increasing geopolitical tensions and extreme weather cited as negative factors. The regulator is pledging to work with government, suppliers, charities and consumer groups to “do everything we can to support customers” but its overriding messaging is clear. Indeed, the organisation’s chief executive Jonathan Brearley says so himself, imploring people to “shop around”.

It is advice that energy experts at price comparison service Uswitch are eager to repeat, pointing out that there are fixed deals available that undercut the new price cap. Richard Neudegg, the firm’s director of regulation, said the cheapest 12-month fixed tariff, for the average household, was sitting at £1,592, representing a £125 annualised saving against October’s price cap. It also offers protection against another potential rise in January, when the next cap is announced.

Neudegg added: “A sanctioned rise in rates, just at the point we start to use more energy over the colder months, brings into sharp focus whether industry regulation is working well for customers. [The price cap] announcement comes just four weeks after Ofgem’s move to retain a ban on tariffs that could offer customers better prices. Customers staring down the barrel of winter might question whether the current price cap system is really the best way to put real pricing pressure on suppliers.”

The cheapest fixed energy-only tariffs cited are provided by Outfox The Market, with an average annual bill of £1,592, OVO Energy (£1,625) and Octopus Energy and Co-Op Energy (both at £1,626).

Although heating is typically the biggest contributor to energy bills, the cost of running major appliances can quickly add up. Experts said it was important to check the wattage of washer dryers, as the cost of running one can vary greatly. According to Which?, the most economical washer dryers can cost as little as £121 a year to run, while the most energy-hungry machines cost £282. Consumers may have to pay a bit more upfront for the most environmentally friendly models, but the energy savings over time can stack up.