Ofgem price cap

Ofgem announced the energy price cap as £1136 this morning. I am all electricity supplied by BULB on standard variable economy 7 tariff. NO GAS.
Am I right in thinking that the maximum price I will pay now will be £1136 per annum for all my electricity and that the DD payments will be adjusted from £120 per month to £95 a month approximately? If not, please can someone explain exactly how this price cap is going to be applied. It seems to me that people supplied on NON STANDARD VARIABLE tariffs will be better off than people who have checked the marketplace and switched for better deals. Will those NOT getting the price cap benefit, have to effectively subsidise those who do in order that the energy companies maintain profits and can pay share dividends? A simple straightforward answer to these points would be much appreciated by an old person like my wife and I who live on a tight budget and small pension. We have to watch every penny.

It seems complicated.

https://www.ofgem.gov.uk/publications-and-updates/ofgem-proposes-price-cap-give-11-million-customers-fairer-deal-their-energy

OFGEM state:
"When the price cap is introduced suppliers will have to cut their prices to the level of or below the cap, proposed to be £1136 per year for a typical dual fuel customer paying by direct debit, forcing them to scrap excess charges for people on poor value default deals.

The exact savings each individual household would make will depend on the price of their current deal, how much energy they use, whether they have both gas and electricity and how they pay for their energy. "

The £1136 cap is for dual fuel average use DD paying customer, and you don’t fit being only single fuel and above average consumption.

So again living in a rural area and not having any alternative fuel such as mains gas, we are penalised for having no choice but to use electricity for all needs. LPG is very expensive and not having a wet system of pipes and radiators plus boiler and costs for regular maintenance is not an option. An old bungalow where the cost of fitting central heating would be prohibitive. I worked in the electricity supply industry and we were not allowed by statute to cross subsidise tariffs between customers and that was the so called “bad old days” of a nationalised industry. Seems to me that privatisation has brought about well above inflation increases in energy charges, cross subsidies, and no choice once you have found the cheapest supplier for your part of the country. Experts keep telling us to keep switching and save £30 a year its all a con as I very much doubt anyone switching would save anything at all after their first switch?
Does anyone know how this new price cap is going to work for real people in the real world ?

I don’t think you are being penalised because your situation is not the one that the new regulations are aiming at. I don’t think your situation will change. It is the kind of people on the expensive standard tariffs of the Big 6 suppliers who will be charged less by their supplier. But they could save more money by switching to other suppliers like Bulb.

@“Bill at Bulb” can you help?

Thank you Bill, I understand.
It’s just that I would be very happy to transfer to one of the standard and expensive tariffs of the Big 6 and pay a capped price of £1136 per annum. It sounds too good to be true and I suspect its not true.
The problem is that I cannot find a full explanation as to how the scheme will work, but if certain customers are to be subsidised by the suppliers then they will have to increase tariffs for those who have switched to better deals in order to balance their books, make a profit and pay dividends to share holders.
The scheme will also not encourage customers to conserve energy as they can only be charged the £1136 per year. It still doesn’t make sense to me. Any assistance to those of us who live on a pension and feel cold in winter should be addressed by the winter fuel allowance and help through some kind of fuel benefit, not by the electricity and gas suppliers, who will have to pass these costs on to its other customers who like us are already struggling to pay bills. Our fuel bills will increase and so, will have to cut back on food and turn heating down.
Who dreams up these schemes ?
Martin
I.Eng., MIET

@waxwing24 there is no £1136 max cap per annum…that figure is based on average consumption.

There’ll be a fix on the unit price basically…But definitely no fixed max price, as that would be a very silly thing to do :slight_smile:

Hi @waxwing24, @AndrewC and @phproxy - Thanks for summoning me! :slight_smile:

Happy to try to shed some light on this. From what we’ve seen in the office, the Average UK home (That’s usage of 3200 kWh for electricity and 13,500 kWh of gas) - should not be paying more than £1136 per year for their energy. The main reason for the price cap is that the ‘default’ variable rate of some suppliers is far higher than this at present (The BBC quoted Scottish Power’s annual payment on their variable tariff at £1257 right now if you used the UK average), and many people who have never switched their energy supplier, or only switched a long time ago, are really paying over the odds for their energy.

Basically Waxwing24, the benefit here is for people that are on a default tariff, and thus getting a really raw deal from their energy supplier. OFGEM aren’t putting in a tariff where you get unrestricted usage for this price (many energy companies would likely go out of business and the planet would suffer greatly). It just means that someone with the usage of the average UK home should no longer be charged more than £1136 - which we think is a good thing. People who haven’t switched shouldn’t be paying higher just because another supplier thinks they can get away with it.

The way this will be enforced will likely be a cap on the unit rate for electricity and gas - if you’re currently with Bulb in London and using the average amount your annual cost would be £990.36, so we’re substantially under this. This is evidence that even with the price cap, looking for better deals out there can still be beneficial.

Waxwing mentioned this in his first post:

Will those NOT getting the price cap benefit, have to effectively subsidise those who do in order that the energy companies maintain profits and can pay share dividends?
This could be a real danger to people currently with the suppliers who have tariffs over what the price cap is proposing - Again though, with Bulb the average user has not come anywhere the cap so this wouldn't be relevant to us.
Does anyone know how this new price cap is going to work for real people in the real world ?

The cap will also be applicable for people with just electricity in their home, as it will have to be linked to the unit rate charged. Ofgem’s proposal has gone into more detail than the media were able to report on in their limited article space.

Any other questions fire away, I’d be happy to help.

Thank you Bill, great to have contact with you and to get some facts about the scheme. I need to read again your comments and understand , thank you for the offer of more help. I have been very happy with BULB since I switched and your staff are always polite and courteous when I call.
I would of course like to see a price drop in kWhrs being all electric and will carry on checking all tariffs , but I am sure you will make sure I have no reason to jump ship, as I cannot find a better deal in the marketplace for electricity!

Martin

A question Bill, your facts and figures are a great help for, I now understand exactly how it will work.
For people like me who are all electric, how do they equate the 13,500 kWhrs to electrical units?
An electrical kWhr is of course 100 % efficiant at the point of use whereas the gas unit conversion efficiency will be maybe just 80% approx plus or minus.
In other words, what is considered to be the average domestic usage for an all electric household in kWhrs or units? Also what is used for the day/night units split?

Martin

Hi again @waxwing24 - I’ve emailed you about your usage and what we’d expect your current cost per year to be with that usage, based off the usage you’ve had since you’ve joined - I didn’t want to share any personal info with the wider community.

:slight_smile:

Disappointed there is yet another price increase coming in November. Bulb started out brilliantly but are just getting more and more expensive. No longer as good as the claim. Seriously considering checking re switching.