Thursday 24 November 2022

Will the new energy price cap affect households?

Ofgem has today unveiled the level of the price cap that will come into force on 1st January.

The energy regulator confirmed that the January cap would rise £730 higher from the current £3,549 to £4,279.

In essence, the energy price cap indicates how much households would pay for their energy bills if there were not any government support.

However, experts suggest that this new cap will be "almost totally meaningless" for consumers as the household bills have been dictated by the government's Energy Price Guarantee.

The difference between the cap and the Energy Price Guarantee is a subsidy paid to energy suppliers - this subsidy is likely to increase in January.

Last week, during his Autumn Statement, the Chancellor confirmed that it will raise the level of the guarantee from the current £2,500 to £3,000 from April 2023.

Martin Lewis said: "The reason I am saying "mostly irrelevant", is the way the system works. We may see some small regional rate tweaks to the guarantee on 1st January. These are unlikely to be significant enough for most people to notice, as the average cost will stay the same.

Commenting on the impact of the price cap, Nico van der Merwe from Schneider Electric, said: “Homeowners are now looking at their energy with purpose, gone are the days of ‘do I know my energy bill?’

“2023 will be a completely new landscape; the topic of home energy management will be bigger than ever and innovation in this space is growing rapidly.

“The price cap has and will be helping millions of homeowners up and down the country, but we still want and need greater control over our energy use.

“At the height of this economic struggle, we still need to be thinking about these long-term solutions that allow us to have the freedom in how we produce, store, and manage our energy.”