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Ofgem price cap explained — why you could still pay more despite energy costs falling | Personal Finance | Finance
Energy bills are set to fall again from October 1 but consumers may want to read up on how the price cap actually works to ensure they aren’t hit by higher bills than expected.
The Ofgem price cap is set to fall from October to December with average bills for a typical dual fuel household paying by direct debit falling from £2,074 a year to £1,923 a year.
But the cap does not represent the absolute maximum that an individual consumer can pay for their energy usage. An energy user, for example, cannot leave every device turned on 24 hours a day and still expect their payments not to exceed the cap.
A crucial thing for bill payers to understand is the price cap relates to the unit price of energy, with the average figures based on typical usage.
This means a larger household with above average usage will pay more than the above figures so people should be careful about their usage.
Another consideration is people tend to use more energy going into the colder months as heating usage rises so monthly bills may go up heading into winter.
Richard Neudegg, director of regulation at Uswitch.com, said: “Rates for the average home will be seven percent lower from October to December, but energy prices remain volatile and are predicted to rise again in January.
“Despite lower unit rates, energy use will be higher, so the average household may only save around £47 next quarter compared to current rates.
“When we also consider that there is no universal Government bill support this winter, the average household will actually be paying more than they were over the same period last year.”
Last year, all households with a direct domestic energy supply received a £400 energy bills discount from the Government in six monthly instalments, from October 2022 to March 2023.
Without the £66/£67 a month payments, Britons will be paying more for their energy this winter.
The price cap news comes after energy minister Graham Stuart wrote for Express.co.uk about the Government’s ambitions to bring down electricity wholesale prices to among the cheapest in Europe.
He said: “We will do this by making the most of our position as world-leaders in renewables and nuclear technology as well as our vital oil and gas sector. It will help us bring industries back to our own shores and unlock growth and jobs.”
Another wider concern from many energy experts is whether the price cap is having the desired effect of keeping prices down for consumers.
Edmund Greaves, editor of personal finance blog Mouthy Money, warned there is a lack of competition in the energy market to incentivise keeping prices down for customers.
He explained: “Before the pandemic we had a wide market of energy providers and it was generally very competitive.
“The cap was, if not ideal, not too bad in these circumstances with lots of consumer deals available for those savvy enough to get a better price for their energy.
“After the ravages of the energy market crisis we’re left with a relatively small cadre of firms dominating the sector.
“These companies have big customer bases and don’t care about being competitive on price, so for the most part are happy to squat like glistening toads right at the higher end of the cap.
“It is patently clear that as prices come down the cap is showing itself to be non-functioning. It is a target for these companies, not a limit. It’s time for a big rethink on how energy prices are regulated and for competition to be reinjected to the market.”
Doug Stewart, CEO of 100Green, called on the Government to scrap the price cap as it’s “never been a cap” and is not achieving its purpose.
He said: “We need to return to suppliers being free to set prices, but support this with rigorous regulation to prevent a return to the race-to-the-bottom price mentality, which encourages price gouging when fixed term cheapest-price contracts come to an end.”
Mr Neudegg also called for changes to the energy pricing rules. He said: “Instead of regulating the exact price of energy every three months and banning cheaper deals, we should set the principle we want to achieve in regulation – that a standard tariff is priced fairly, based on costs.
“This could require all suppliers to offer a transparent standard tariff that provides value for money to households, but also gives them the ability and incentive to do things better. Targeted support should also be available to the most vulnerable.
“For consumers who would like more price certainty over the winter months, there is still an opportunity to lock in a reasonably priced fixed deal before rates potentially rise again.”
For the latest personal finance news, follow us on Twitter at @ExpressMoney_.
Mumbai:
The Indian equity benchmark indices opened higher on Friday amid positive global cues, as buying was seen in the IT, pharma and auto sectors in the early trade.
At around 9.27 am, Sensex was trading 265.3 points or 0.33 per cent up at 80,066.81 while the Nifty added 89.85 points or 0.37 per cent at 24,336.55.
Nifty Bank was down 222.85 points or 0.40 per cent at 54,978.55. The Nifty Midcap 100 index was trading at 54,980.80 after increasing 10.95 points or 0.02 per cent. Nifty Smallcap 100 index was at 16,903.30 after declining 60.20 points or 0.35 per cent.
According to market watchers, “after a positive opening, Nifty can find support at 24,200 followed by 24,100 and 24,000. On the higher side, 24,500 can be an immediate resistance, followed by 24,600 and 24,700.
“The charts of Bank Nifty indicate that it may get support at 55,000 followed by 54,700 and 54,500. If the index advances further, 55,500 would be the initial key resistance, followed by 55,800 and 56,200,” said Hardik Matalia, Derivative Analyst of Choice Broking.
Meanwhile, in the Sensex pack, TCS, Tata Steel, Maruti Suzuki, Eternal, ICICI Bank, SBI, HDFC Bank, Infosys, M&M and Tata Motors were the top gainers. Whereas, Axis Bank, Tech Mahindra, Nestle India and IndusInd Bank were the top losers.
In the last trading session, Dow Jones in the US added 1.23 per cent to close at 40,093.40. The S&P 500 climbed 2.03 per cent to 5,484.77 and the Nasdaq added 2.74 per cent to close at 17,166.04.
In the Asian markets, Jakarta, Bangkok, Seoul, Hong Kong, China and Japan were trading in green.
According to analysts, US markets extended their rally on Thursday as investors snapped up hard-hit technology stocks, helping boost the S&P 500 out of correction territory.
The foreign institutional investors (FIIs) bought equities worth Rs 8,250.53 crore on April 24. However, domestic institutional investors (DIIs) sold equities of Rs 534.54 crore on the same day.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
Mumbai:
Indian equity markets are trading in the red as tensions soar between India and Pakistan over the Pahalgam terror attack in Kashmir. Sensex, the 30-share BSE benchmark, has crashed over 1,000 points and is now trading below the 79,000-mark. Nifty, the NSE index of 50 shares, fell below 24,000 points.
The markets went up in early trade, driven by a global rally and fund inflows, but the momentum got lost thereafter, and it gave up the initial gains.
The markets are also upset by unimpressive March quarter earnings by Axis Bank, the third-largest private sector bank of the country. The bank’s shares have fallen 4.65% after reporting a decline in quarterly profit from Rs 7,130 crore in the year-ago period to Rs 7,117 crore.
Besides Axis Bank, major laggards include Bajaj Finance, Bajaj Finserv, Tata Motors, and Tech Mahindra. On the gaining side are TCS, Infosys, Reliance, HCL Tech, HDFC Bank, and ICICI Bank.
At least 26 civilians were massacred by terrorists in a tourist hotspot known as ‘Mini Switzerland’, leading to both countries pulling out their diplomatic staff and suspending visas issued to the other nation’s citizens. (Follow live updates here)
The latest flare-up at the Line of Control was speculative firing by Pakistani troops, which is being seen as an attempt to provoke the Indian side. Indian troops retaliated effectively against the firing from multiple Pakistani posts.
As Indian equities braced for the impact, global equities, including the Asian markets, were charting in the positive territory. South Korea’s Kospi index, Tokyo’s Nikkei 225, Hong Kong’s Hang Seng, and Shanghai SSE Composite were all in green.
Similar trends were seen in US equities, too. Last evening, Nasdaq Composite closed 2.74 per cent higher. S&P 500 jumped over 2 per cent and Dow Jones Industrial Average surged 1.23 per cent.
Mumbai:
Equity benchmark indices Sensex and Nifty declined in early trade on Thursday amid profit-taking after a seven-day rally and muted trend in Asian markets.
The 30-share BSE benchmark declined 242.01 points to 79,874.48 in early trade. The NSE Nifty went down by 72.3 points to 24,256.65.
In the past seven trading days, the BSE benchmark gauge zoomed 6,269.34 points or 8.48 per cent and the Nifty jumped 1,929.8 points or 8.61 per cent.
From the Sensex firms, Eternal, Bharti Airtel, ICICI Bank, Mahindra & Mahindra, HCL Technologies, Reliance Industries, and HDFC Bank were among the laggards.
IndusInd Bank, Tech Mahindra, Nestle, Bajaj Finance, Axis Bank, and Tata Motors were among the gainers.
In Asian markets, South Korea’s Kospi index, Shanghai SSE Composite, and Hong Kong’s Hang Seng were trading lower while Tokyo’s Nikkei 225 quoted in the positive territory.
US markets ended sharply higher on Wednesday. Nasdaq Composite jumped 2.50 per cent, S&P 500 surged 1.67 per cent and Dow Jones Industrial Average climbed 1.07 per cent.
Global oil benchmark Brent crude climbed 0.12 per cent to USD 66.20 a barrel.
Foreign Institutional Investors (FIIs) bought equities worth Rs 3,332.93 crore on Wednesday, according to exchange data.
The BSE benchmark jumped 520.90 points or 0.65 per cent to settle at 80,116.49, the highest closing level since December 18, on Wednesday. The Nifty rallied 161.70 points or 0.67 per cent to 24,328.95.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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