Energy price cap: what is it and do I pay more?

As the cost-of-living crisis deepens and more families call for help, plans to reduce bills are expected for households that use less energy during peak periods.

It comes as energy regulator Ofgem announced the current cap would rise by 80% to £3,549.

The new cap begins on October 1 and will see 24 million households pay for their energy.

What is the energy price cap?

The price cap introduced by Ofgem is the maximum amount companies can charge households per unit of energy consumed (kilowatt hour or kWh on your bills).

The price cap will also limit how much energy companies can charge their customers for their basic charges (connection to the grid).

Ofgem has set the cap depending on how much energy companies have to pay for electricity and gas to supply households.

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How does the energy price cap work?

As stated by the Money saving expert website: “The price cap caps the maximum amount suppliers can charge for each unit of gas and electricity you use, and sets a maximum daily base fee (what you pay to get your home connected to the grid).”

This means there is no upper limit to what a household would pay. If you use more energy, you pay more, and if you use less energy, you pay less.

As the MSE website It says: “It only applies to the standard and standard tariffs of the provider. So if you have a fixed-term energy contract, the cap does not apply. If you haven’t switched in the last year or so, you likely have a capped plan.”

Do I pay more if the energy price cap goes up?

More than 24 million household bills will rise as energy price cap increases to £3,549

The rise in prices is also likely to mean that many people will be forced to not be able to afford to heat their homes.

Energy company E.on UK estimates that almost one in eight households is struggling to pay their bills, adding it could rise to 40 per cent by October. Energy price cap: what is it and do I pay more?

Fry Electronics Team

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