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Last week it was announced that the Ofgem price cap would be lowered in April. That means 11 million households will be saving £17 a year on their energy bills.
All savings are worth celebrating, right? But Martin Lewis, our favourite money expert, warns households to not be fooled by the new lower price cap.
Ofgem price cap
Ofgem announced on the 7th February that on 1st April the price cap on standard and default tariffs would drop from £1,179 to £1,162 a year. For homes on a prepay tariff, the cap would drop from £1,217 to £1,200 a year.
However, Martin Lewis explains that households shouldn’t rely on the price cap fall to save money. Households could be saving up to £370 a year by switching to the current cheapest energy deal.
‘The price cap may have fallen by a smidgeon. But, the prices of the cheapest deals have plummeted, and are getting close to 2016 prices,’ says Martin Lewis on his site Money Saving Expert.
‘The price cap is only for six months. While many of these cheap deals are one-year fixed rates, meaning you’re locked in on a low rate for longer.
‘So while the new price cap rate from April is £1,162 a year for someone with typical usage. The market’s cheapest deals are a little under £800 for the same usage,’ the savings guru adds. ‘Even some big six firms often have far cheaper deals are one-year fixed rates, meaning you’re locked in on a low rate for longer.’
The price cap works by setting a limit on the maximum amount that a supplier can charge for a unit of gas and electricity. It is reviewed twice a year, with changes enacted in April and October.
If you find you are on a tariff that’s within a few pounds of the price cap, you’re probably paying too much.
Shop around and see if you could be saving £370 a year rather than a measly £17.