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The Ofgem price cap – what is it and how does it work?

You may be wondering how the price cap set by Ofgem impacts you and the size of your energy bill. That’s why we’ve created a comprehensive summary of the price cap to help you better understand your bill.

The price cap broken down

When you select an energy supplier, you usually sign up for a fixed tariff that lasts 1 year. After that year has ended, your supplier automatically switches you to a default tariff. This is often referred to as a Standard Variable Tariff (SVT).

These tariffs are always way more expensive than the initial deal you got with your supplier. Ofgem estimates that 50% of British consumers are on a default tariff and therefore are vastly overpaying. At the start of 2019, Ofgem implemented a price cap (also called a safeguard tariff) on default tariffs to protect the wallets of consumers.

This price cap is adjusted every 6 months in April and October. The cap is updated to match the increasing or decreasing prices of energy to ensure that wholesalers (where your supplier gets their energy from) receive a fair price. The cap is on a unit of energy so even if you and your neighbor have the same supplier, your bill will be more expensive if you use more energy

The price cap differs by region

There are 8 costs that determine where the safeguard tariff is set. These costs may be higher or lower depending on which area of the UK you live in. This means that if you live in an area that is relatively cheap to transport energy to, your cap will be lower than your friend who lives in a region that is difficult to send energy to. Keep in mind that the cap only impacts those living in England, Wales and Scotland. Northern Ireland is regulated by the Irish version of Ofgem called Utility Regulator.  

Are you curious who controls the energy distribution in your region? Check out these maps provided by Ofgem below:

Electricity Distribution Networks  Gas Distribution Networks

It’s easy to make sure you’re getting the best deal out there

It can be overwhelming to make sure the tariff you’re on is good quality and a fair price. Ofgem estimates that those who have not switched could be overpaying by £320 a year. Luckily, Switchd is here to help. Sign up once with Switchd, and they’ll keep you on the best deal saving you an average £392 per year. What’s more, Switchd won’t charge you a penny until we’ve saved you at least £50. If you want to save money without constantly spending tons of time scouring the web for the best tariff, sign up with Switchd today!