Energy price cap – is now a good time to switch tariffs?
.png?w=420&h=280&fit=crop&auto=compress%2Cformat&rect=0%2C0%2C1500%2C1000)
Alison Perry
Netmums contributorThe government's new energy price cap could cut energy bills by £200 – but is now a good time to switch energy tariffs?
As Ofgem confirm that a 12% energy price cap reduction will take effect from 1 April, millions of households across the country will see their energy bills fall.
This will be the lowest energy bills have been in two years with families on average paying £238 less for their bills annually than the current rate.
But could families save even MORE by switching to a fixed-term energy tariff?
Jasmine Birtles, personal finance expert and founder of Money Magpie, tells Netmums that now is not a good time to switch. She says: 'I would I would wait before switching because there is potential that the price cap will come down further in July before potentially going back up in October.'
- Cash boost for anyone claiming Child Benefit – coming in weeks
- Primark's 'timeless and chic' £18 dress that's a smart wardrobe staple
- Spring Budget predictions – and how new policies will affect parents
'I think it's a good idea to wait'
Jasmine says that while her advice is to stick with your current deal for now, it is a gamble either way, much like deciding whether to get a fixed-term or tracker mortgage.
'We need to know what's going to be happening in the future and without a crystal ball, it's harder to see,' she says. 'But having a general sense, I think that it might be a good idea to wait until at least April and maybe the summer and then switch to a fixed tariff.'
Jasmine says that summer is always a good time to move to a fixed tariff anyway. 'I tend to say to people if you're going to fix, fix in the summer. Prices tend to be lower then because – of course – we use less energy, and certainly this year it does sound like it might be a good time to fix.'
Extra charges for households
Even though the price cap is coming down, Jasmine warns that our bills won't be coming down as much as they might have done because there are going to be some extra costs for households.
'Ofgem has already announced a new charge of £16 per household to help the suppliers cope with £3billion of debt that's been built up by a lot of people who couldn't pay their bills.
'There's also going to be a small charge for helping those who are on prepayment meters because it's generally the lower income households who are on prepayment meters. And that costs more than if you're on an ordinary meter and you're paying by Direct Debit.
'So that cost is being spread more so that the people on lower incomes don't have to pay the extra.'
The Price Cap sets a limit on the maximum amount suppliers can charge for each unit of gas and electricity you use, including the daily standing charge.
— Ofgem (@ofgem) February 23, 2024
Today we have announced what the price cap will be from 1 April 2024.
Watch our video below to find out more ⬇️ pic.twitter.com/3TB5SWgIfp
What is a fixed-rate energy tariff?
A 'fixed-rate' energy tariff means your unit price for gas and electricity is 'fixed' for however long your plan lasts (usually at least a year).
So, if you're signed up for one year, it means that you won't be charged more if your supplier announces a price rise.
Fixed-rate deals offer security for households and historically they've offered good value, with cheaper deals.
What is the energy price cap?
Ofgem is Britain’s independent energy regulator, which sets the energy price cap so that people aren't paying too much for their electricity or gas.
The energy price cap is a limit on the amount suppliers can charge you for each unit of electricity or gas you use. This price cap was first introduced in 2019 amid concerns people were paying too much for their energy.
The cap changes four times a year – on 1 January, 1 April, 1 July and 1 October.
Related stories:
