Throughout the UK, consumers spend more than £1,200 on energy bills each and every year, with many not knowing if their cost is in-line with their neighbours or more expensive.

Whichever energy company one starts with is the selection they tend to stick with over time, simply because the thought of researching a switch or implementing the change is assumed cumbersome. In reality, millions of customers are paying too much in energy costs – an issue taken up by government regulators in recent months.

Starting 1 January, more than 11 million consumers spanning the UK could save an average of £76 per year thanks to a new energy price cap set in motion. Ofgem, an energy regulator, set the final price cap at £1,327 for those who are dual-fuel customers paying by direct debit. Although the price cap could rise in the upcoming months and in years to come, it is a respite from the ever-increasing prices charged by energy companies large and small.

Why the Cap Now?

Implementation of the new energy price cap comes at a time when residents are fed up with their energy providers, constantly questioning whether what they pay is too high. Without making a switch or comparing pricing with other energy companies, though, many are unaware of the potential savings they could gain. Homes in England, Scotland, and Wales are all on default tariffs, like standard variable tariffs, and should see a reduction as the cap is set in motion. These default tariffs are not necessarily a boon from energy companies, but instead in place because consumers never switched to another provider or they have not switched recently.

The government price cap on energy costs will be beneficial to many households, but the extent to which savings are generated depends on energy use. Consumers are also impacted differently depending on which tariff they are currently on, if both gas and electricity are provided in the home, and how efficiently the home is using that energy. For now, the price cap is put in place to limit the cost of units of energy used – not necessarily the total bill consumers will pay. For average households, the savings may reach £76 per year; for high-consumption homes, savings may be minimal.

Energy Switching a Smart Solution

Although putting a lid on the per-unit price for energy provided to UK households is beneficial in the moment, many worry that the fix is merely temporary. The price cut is set to be reviewed as early as April this year, and again each year according to Ofgem. Any potential savings could be minimised if the cap is increased each review period. However, consumers have an option to save on their energy costs through different means – energy switching.

The price cap may create some confusion among consumers that they are getting the best deal, since energy companies are required to drop their prices down below the cap. However, there could be additional savings available to consumers who look into switching their provider altogether. A finance specialist from an energy comparison resource explains that comparing utility companies and making the switch to one with the lowest cost is still the best way to save. Doing so ensures households are receiving the least expensive power for their home, potentially getting better customer service, and even receiving incentives for switching. The idea of switching energy providers may seem daunting, but the process is quick and simple in most cases.

Making a switch from one provider to another is still the smartest solution when it comes to saving money on energy costs. The price cap helps, but only temporarily, and only for those who are unwilling to research what options they have with a different provider. Currently, only one energy company offers pricing below the recently set cap, and consumers are not guaranteed that reviews of the limit in the future will prove beneficial from a savings front. Instead, there is a need to evaluate options for switching to an energy company that offers flexibility in tariffs charged, potential greener energy options, and of course, price reduction now and in the future.