Price Cap Confusion: Over half of homes don’t understand what the Price Cap is or does
More than half of households (54%) say they aren’t sure what the price cap is or what it does, according to new consumer research by Uswitch.com, the comparison and switching service.
More than two thirds of households (68%) on Standard Variable Tariffs don’t know that the energy price cap changes every three months – meaning they’re unaware that their bills can rise or fall four times a year.
Meanwhile nearly a fifth of younger consumers aged 18 to 34 (18%) have never even heard of the price cap.
Consumers can be forgiven for being confused, as the price cap moved from changing once every six months to being updated quarterly in October last year.
At the time households were protected by the Energy Price Guarantee, which kept average bills at £2,500 a year, meaning that consumers didn’t see their costs change with the price cap. This October will be the first time consumers see their energy bills change after three months.
While a third of households (32%) know that the price cap changes every three months, more than a quarter (28%) still believe it is only updated twice a year. One in ten bill-payers think it changes once a year or even less frequently, while three in ten (30%) don’t know how often it varies.
Most troublingly, almost half of consumers (45%) wrongly believe that the price cap is the maximum amount you can pay for your yearly energy bill. In fact, the price cap limits the amount that energy companies can bill customers for standing charges and unit rates of gas and electricity, so it varies by household – the more you use, the more you pay.
Three in ten households (31%) say the energy price cap has kept household bills high by stopping suppliers from offering competitive deals, and a quarter (26%) blame the price cap for stopping them from getting a better energy deal with another provider.
Ahead of next week’s price cap announcement, Uswitch.com is calling on Ofgem and the Government to reform the price cap to bring energy bills down.
Richard Neudegg, director of regulation at Uswitch.com, comments: “The majority of energy customers are on tariffs that follow the price cap. The two thirds who don’t realise that their prices can change every three months will be in for a shock now that the Energy Price Guarantee is no longer in place.
“Next week, Ofgem will announce the new price cap that will dictate the cost of gas and electricity for the start of the winter – the time of year when we start turning the heating on.
“Unfortunately the price cap, alongside other Ofgem rules currently in place, has failed to bring about meaningful competition, as suppliers have no incentive to offer better prices to anyone.
“Energy retailers are barred from offering cheaper tariffs specifically to win new customers due to the regulator’s ban on acquisition-only tariffs (BATs). When suppliers have no incentive to attract new customers – or fear of losing current ones – consumers lose out.
“The price cap system needs reforming in a way that offers protection for households and puts real pressure on suppliers to do better for consumers, both in cheaper rates and customer service.”
To find out more about the Ofgem Energy Price Cap and what it means for your household, visit our guide at Uswitch. Spotted something? Got a story? Send a Facebook Message | A direct message on Twitter | Email: News@Deeside.com