I have just received an email from British Gas containing:
"Youre currently on a fixed price tariff, so the Energy Price Guarantee will protect you in the same way that it protects customers on a standard variable tariff. Were just working through the detail, and what this means for you. So, keep an eye out for an email from us.
However, if you want to switch to our standard variable tariff now, you can do this online - without paying any exit fees. Just so you know, the rates currently shown are based on the current price cap of £1,971. The new rate of £2,500 will start on the 1st October, so make sure you factor that in when making your decision."
I am struggling to understand it as I thought that there was no protection for people on fixed price tariffs based on a report in the press.
Can anybody throw any light on it please - I'm happy to read links but don't know where to start.
If you're on a fixed price tariff, then you're on a contract of fixed length so that your prices don't change during the period of the contract. Otherwise what's the point.
That's why I thought it was odd they offered to let me change. My current situation is:
Tariff ends: 31 Dec 2023 Gas Estimated annual cost: £845 Electric Estimated annual cost: £562.23
This is quite a long way below the price cap so it seems sensible to stick with it. I have submitted readings today so will be able to see where I am in a day or two. The system said the electricity reading was higher than expected which is odd as I don't use the immersion heater here, I do have an electric oven though.
I would guess that knowing that people who are on fixed price tariffs (possibly very expensive ones to take account of the increases that were thought to be coming), would get very angry at paying so much when the variable rate has been capped far lower than was expected and for an extended period; and that government was "suggesting" that those on fixed tariffs should be released without early termination fees; they have decided to avoid the problem and drop the fixed tariffs down to match the cap or to offer to move people off the fixed tariff to the variable one.
You can't just look at what you pay, you need to look at the units you consume, the price per unit and the standing charge. The cap is not a cap on what people actually pay, but on what an "average" household would pay. That means that the company sets its per unit charge and standing charge, so that the bill for average consumption meets the cap requirements. A low user on a high tariff may come in well under that cap, but still be paying more than they would on the capped tariffs.
EDF tell me that I am protected for the Electric paid on direct debit after the quarterly bill date. I think a lot of litigation may occur if they attempted to end a fixed price deal as being fixed is the whole point of it. It could be said it was mis sold, landing them in the shit if they tried to change it before the due date. They did say that there are no fixed price offers at thee moment due to volatile price variations in the market. Obviously the current variable is good but the key word is variable, how can you possibly budget if your outgoings are not known? Brian
I've found the Martin Lewis email - see point 15. Reading again it may be for just contracts taken out in the future. In another article he points out if you took out a new fixed price contract you have 14 day cooling off period.
On the back of a prior briefing and the announcement in Parliament, here is my very quickly bashed out summary of the new energy price freeze.
1.The new price guarantee starts 1 October, and for someone on typical use will be £2,500 a year and will last for two years.
2.The current price cap is £1,971 a year rate at typical use, and was due to rise to £3,549 a year (and likely £5,400 a year in January). It was £1,277 a year last winter.
3.This will be a cap on standing charges and unit rates, so use less you pay less, use more you pay more (I’ll publish the rates when I have them). There is no total cap on what you pay, the typical rate is just a figure for illustration.
4.The new lower price cap includes getting rid of the green levies.
5.The £400 payment to all homes (paid as £66 a month over winter) will continue.
6.That will take the average payment to £2,100 a year.
7.To estimate what you’ll pay, over a year, multiply current costs by
6.5% (each £100 becomes £106.50). This includes the £400 discount (but not other payments).
8.For those with lower than typical bills, the % increase will be lower, for higher users higher (as the £400 payment is flat regardless of use, so has a bigger proportionate reduction on lower usage).
9.The £650 payments to those on many benefits will continue (half’s already been paid).
10.As will the £150 to those with disabilities and £300 to pensioners.
11.There’s no announcement on whether these payments will be in place next winter – I suspect the political reality is at least for benefits recipients – similar will be paid next year.
12.VAT is not being reduced in this announcement, but there is a chance (50-50 I’d say) that may happen in the Chancellor’s fiscal statement next week.
13.For those on LPG and heating oil, I’m told there will be discretionary payments to help them too (awaiting details).
14.For those in park homes and who pay landlords directly, I’m told they should benefit from the new business help (awaiting details).
15.I'm hearing fixed tariffs will have the same per pound unit rate reduction as variable tariffs (ie, roughly 30% off). So it looks like, unless you fixed at over the new October price cap level, your fix will be cheaper than moving to variable. (More to check on this.)
These are provisional findings. We'll be updating Martin's energy price guarantee news story with updates and developments when we get them.
We'll update our How much will I pay under the price cap calculator? with the new unit rates as soon as we get them. And see our What to do if you're struggling to pay your energy bills guide, which explains the extra support available.
I would think that they will only be looking at moving people from fixed price tariffs where that tariff would expire before the price cap ends and/or that tariff would mean them paying more than they would on the price capped variable tariff.
The price cap is for a typical house. If your house isn't typical then this may or may not be a good deal. You need to compare your kwh rate with the price cap kwh rate.
So what is this "typical house" consumption (in KWH for leccy and gas) that everyone keeps referring to? Also the standing charge, does this vary by house? Didn't think it did except by supplier and/or location.
It's a nominal figure of 2900kWh for electricity and 12000kWh of gas per annum.
In general if you are on the standard variable tariff your bill will be capped at £2500 (from October) if you use exactly this much energy per year.
If you use twice as much energy the maximum bill will be twice as much and similarly if you use half as much the maximum charge will be half.
If you are not on a standard variable rate tariff or are a business customer the price cap doesn't necessarily apply.
It can vary between suppliers and location but the combined standing charge plus unit costs are capped at £2500 (from October) if you use exactly 2900kWh of electricity and 12,000 kwh of gas per annum.
Effectively the cap is on both daily standing charges and unit charge and is not on the total amount you may/will have to pay.
There may be deviations from this cap amount if you are paying off previous debts and/or on a pre-payment meter. You may also get some discounts if paying by direct debit etc. Some suppliers may call the discounts a loyalty bonus or some such these days to get over some legislation to do with collection of money.
The price cap was originally intended to help those who didn't shop around for the cheapest fixed deal which in previous years were always cheaper than the standard variable tariff. With high wholesale prices the standard variable tariff is cheaper than most/all new fixed price tariffs.
But those aren't the rates that will apply and which are being referred to in Liz Truss's information.
The whole concept of expressing a typical bill for a typical house is utterly meaningless. I really wish they would quote a price per kWhr (elec) or price per cubic metre/foot (gas) then we could work out much a unit would cost and therefore work out our bill based on our usage (eg for the same time last year).
Our gas usage has dropped by about 30% compared with last year, as a result of us taking greater energy-saving measures since fuel prices started to go silly a few months ago. Those measures included turning down our thermostats from about 20 to 18, and keeping the kitchen door closed in colder weather, to keep the heat of our Aga into the kitchen/dining room/lounge/study part of the house: it is amazing how much heat was being lost to the hall and bedrooms. Electric blankets and a heated "poncho" for my wife in her office may allow us to reduce the heating in that part of the house, though we've decided that we won't let ourselves suffer - we're only cutting back on excess, not *all* heating.
Our heating hasn't actually come on at all since about May, so the only gas we've used is about 1.2 cubic feet for the Aga, and occasional hot water for showers etc.
Electricity usage is also a bit lower, by putting PCs to sleep when we are not using them, unplugging (with a smart switch) the TV when we're not using it, and likewise unplugging laptop and phone chargers when they are not in use. We've got electricity usage down from about 12 to 9 kWhr per day, though a lot depends on how much we use the dishwasher and washing machine. A large saving (well, about 1 kWhr/day) came when we noticed that a beer fridge (underneath the centre "island" in the kitchen, installed by the previous owners) had got turned on somehow. Since my wife had left its door ajar so it didn't go mouldy inside, the fridge must have been working flat out to cool down, without ever achieving the temperature - whoops!
+1 I was speaking to someone the other day who believed that the £2500 figure was the maximum they would pay irrespective of how much energy they used this winter.
It's unhelpful, but there are a number of variables (region, payment type, Economy 7 or not) so there are a number of tariffs, and so a number of different caps.
The cap is utterly not designed for what it's now used for. Previously the purpose of the cap was not to specify a price people would all pay, it was a cap on prices for people who didn't switch, who were previously being ripped off with price gouging by the 'Big Six'. The cap specified the maximum standing charge and the maximum at the 'average' number of units, but allowed companies some flexibility within those points. For example a company could set their standing charge to zero and recoup that in higher unit costs, as long as the unit price times 2900kWh (formerly 3100kWh) is less than the cap. Or they could offer some kind of funky time of use tariff as long as it was lower than the multi-rate cap (at 4200kWh).
This is all ancient history now - since every supplier is on government support, there should just be a common standing charge and unit rate for everybody on the cap, at least within a specific region. Get rid of the prepayment premium (not sure about the pay-on-receipt-of-bill premium, since that does incur extra costs), and just say that your energy costs Xp per day and Yp per kWh. Since smart meters display kWh that should be easier for people to work out.
I'm not sure why this isn't changed but it may need primary legislation, and so it's easier for Ofgem to tinker with the current cap rates.
That's not quite right - your cost for consumption would be double or half, as you say, but the cap also includes the standing charges, which do not vary with consumption levels.
You can't have a simple price like that. The companies are free to set their own per unit rate and standing charges, as long as someone with average consumption pays no more than the capped price. They could offer a low standing charge and higher per unit rate or the reverse, as long as it met the cap criteria.
The whole point of an average consumption and a price cap was to avoid centrally setting per unit prices and standing charges, so as to allow competition via different tariffs.
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