Energy Price Cap Confusion

The intricacies of the energy industry can often leave consumers feeling overwhelmed and perplexed. A recent study by has highlighted widespread confusion concerning the energy price cap. But what is behind this confusion, and why is there a call for change?

Key Points

  • Over half of energy customers are uncertain about the function and purpose of the energy price cap.
  • A significant number of households are unaware that the energy price cap changes quarterly.
  • Misunderstandings prevail about the price cap’s impact on yearly energy bills.
  • Younger consumers, particularly those aged 18 to 34, lack awareness about the price cap.
  • urges reforms to the price cap to benefit consumers.

Understanding the Energy Price Cap

Whilst the energy price cap is a topic of much discussion, it seems that a majority of households (54%) are still in the dark about its actual function, according to research from Opinium, which surveyed 2,000 UK households recently.

The price cap, which sets a limit on the maximum amount energy providers can charge for their standard variable tariffs, changes every three months. Yet, shockingly, 68% of households on these tariffs aren’t aware of this periodic adjustment.

This means that many consumers will remain uninformed about potential fluctuations in their energy bills throughout the year.

Effects on Consumer Energy Bills

For many, the energy price cap is mistakenly believed to be a cap on their annual energy bills. In reality, it merely limits the amount energy companies can bill for standing charges and unit rates of gas and electricity. Therefore, energy bills are calculated on consumption – the higher the gas and electricity usage, the larger the bill.

This October will mark the first time many consumers will experience a change in their energy bills after just three months, as previously, costs remained consistent due to the Energy Price Guarantee, which maintained average bills at £2,500 annually.

Belief About Price CapPercentage of Households
Changes every three months32%
Updated bi-annually28%
Changes annually or less10%
Uncertain of frequency30%
A man confused about the energy price cap

Misconceptions about Price Caps

Te research from Opinium shows that many UK consumers have misconceptions about price caps. About 31% of households assume the cap keeps bills high by hindering suppliers from offering competitive deals. Another 26% feel trapped, and blame the cap for their inability to secure a more attractive energy deal with an alternate energy provider.

This is particularly concerning as many families are struggling to pay their energy bills as the high costs of living has eroded their spending power.

Uswitch’s Call to Action

As the announcement of next week’s price cap approaches, Uswitch is championing the need for reform. Richard Neudegg, the director of regulation at, emphasises that the majority of energy customers who are on tariffs that shadow the price cap, are in for a surprise with the cessation of the Energy Price Guarantee.

He stresses the urgency for a system overhaul that safeguards households and compels suppliers to step up – not just with competitive rates but also in customer service.

The Energy Price Guarantee (EPG) Explained

The EPG limits the per-unit charge for electricity and gas, offering protection against sharp price hikes. While a consumers total energy bill reflects energy consumption, the EPG ensures that unit prices remain stable. The government has been compensating energy firms for the difference between wholesale prices and customer charges.

A calculator and a notepad

Bill Calculations and Comparisons

The following table shows the typical household dual-fuel bill under Ofgem’s price cap and the government’s EPG:

DurationOfgem’s Price CapGovernment’s EPG
1 Oct – 31 Dec 2022£3,549£2,500
1 Jan – 31 Mar 2023£4,279£2,500
1 Apr – 30 Jun 2023£3,280£2,500
From 1 July 2023£2,074Determined by Ofgem

From 1 July 2023, with Ofgem’s price cap dropping below the EPG level, the government’s financial support for energy will effectively end.

Consumers are Losing Out on Cheaper Energy Deals

Richard Neudegg makes a telling point about the lack of competition within the energy market. He commented that “Unfortunately the price cap alongside other Ofgem rules currently in place have 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), and when suppliers have no incentive to attract new customers – or fear of losing current ones – consumers lose out.”

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