Ofgem’s energy price cap costs families money
The energy Cap has been labelled ineffective as 66 deals now cost more.
A loophole has been found in Ofgem’s price cap regulations and is being exploited by energy companies. This is despite the new cap of £1,137 only coming into force a few weeks ago.
The auto-switching service Look After My Bills has found 66 energy deals which are now more expensive that the price cap.
The cap brought in by Ofgem only applies to standard variable tariffs (STVs), also known as default tariffs. This means that many households that thought they would save money by finding a fixed deal are now being left out of pocket as they’re not able to benefit from the cap.
Some STV deals are being charged at rates higher than Ofgem’s price cap, such as the PFP Energy Simple Clear deal, which charges £1,265.32.
Although fixed deals are seen as the safe option by many consumers, keeping yourself locked into a deal that is pricier than the cap could leave you short-changed.
Households in fixed deals are therefore being left paying above the price cap, and facing high exit fees if they choose to switch now.
Some exit fees for these tariffs can range from £60 to a massive £100, and a lot of the fixed rate contracts that homes are locked into can be as long as 18 months.
There are a few deals — such as PFP Energy’s Simple Clear and Scottish Power’s Help Beat Cancer Fix and Save January 2021 — that don’t have exit fees. This means that homes on these deals could switch without losing more money.
The most expensive tariff comes from the supplier Ebico, which charges £175 more than the price cap. As well as this tariff, each one of the Big Six has a deal that charges more the cap, with the priciest of the big six being British Gas. Their most expensive deal costs £1,255 per year, with an exit fee or £80.
Ofgem said that their price cap would save 11 million households money — those on poor value deals would see a return.
A spokesperson from Ofgem said: ‘We have designed the price cap so that suppliers are still able to offer both variable and fixed rate tariffs priced below the level of the cap, and there are many cheaper fixed deals available.’
However, many have criticised the regulator, saying that these savings will be wiped out as the cap will likely be increased in February.
Ofgem has now confirmed that it will announce the level of the price cap that will take effect from April on 7th February. The cap will then be reviewed every six months.
Rather than relying on the price cap to save you money then, it’s best to use a price comparison site like A Spokesman Said and make sure you’re picking the right deal for your household and your budget.
Read up on all the options and find yourself a deal that really saves you cash, and avoid losing out because of the price cap loopholes.
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