Beware of Deceiving Post Energy Price Cap Deals - Pocket Your Pounds


Beware of Deceiving Post Energy Price Cap Deals

By The Pocket Your Pounds Team | Published January 21, 2021

Avoid falling for the post-hike deal trap and secure the most energy savings for life

 What is a price cap?

The energy price cap sets a limit on the amount that energy suppliers can charge per kWh of gas and electricity (also known as the unit rate) for domestic customers on standard variable rate, or default, energy tariffs. 

With these tariffs – which are used by an estimated 11 million households in the UK – the cost of units of gas and electricity can go up and down. The alternative is a fixed rate tariff. These usually last for 12 months, and the price of each unit of energy you use is fixed for that period.

The energy price cap was introduced at the government’s behest to shield variable rate customers from sudden, steep price hikes. 

If you’re on a fixed rate tariff, you won’t be able to get the energy cap. This is because most fixed rate tariffs are lower than the cap in the first place.

Ofgem encourages those on variable rate tariffs to switch to competitive fixed rate deals as a way to save money.

Standard variable tariffs are typically the most expensive type of energy tariff. 

You’re likely to be on one of these tariffs if you have never switched energy deals before, or your fixed rate tariff has come to an end. 

As it stands, 77% of homeowners are unknowingly on the most expensive deal.

How is the price cap set?

The price cap is set by Ofgem and is calculated based on the latest wholesale energy costs, network costs, operating costs and tax.

This is the maximum amount Ofgem calculates should be charged to a typical household using the average amount of energy during the course of 12 months. It is not the maximum amount every household will pay.

The price cap can vary depending on where you live. This is due to varying costs for transporting energy across the energy network to the region you live in.

There are two energy price caps – one for prepayment tariffs, and one for default tariffs.

Ofgem announced that its price cap for 11 million default tariff customers will increase by £96 to £1,138 on 1 April. Four million prepayment meter customers will see their cap increase by £87  to £1,156.

The current default price cap is £1,138 per year from 1 April 2021

The current prepayment price cap is £1,156 per year from 1 April 2021

How does the energy cap affect me?

These price caps affect the rates you pay for your gas and electricity per unit. It doesn't limit how much you pay in total.

Your energy supplier will have to lower their rates if they're higher than the price cap. Keep in mind too that the price cap won’t limit your total energy bill, so if you start using more energy each month, your bill will still increase.

In the same way, if the cap levels go up, your supplier could increase their rates to match the cap. This means you’ll pay more.

Will the cap save me money?

The aim of the price cap is to help ensure that customers on a prepayment tariff or a poor-value default energy tariff pay a fair price for their energy and are protected from being overcharged.

If wholesale costs fall, the price cap will also fall and energy bills might come down, but if costs rise, the cap ensures consumers won’t be hit with an extortionate price hike. The cap is also subject to increase, as we saw on 1 April 2021. 

While this all sounds good in theory, the reality is you can usually save much more than the price cap will save you by shopping around and switching to a more competitive tariff.

Using the example of a typical customer, who has dual fuel, medium usage, and pays with direct debit:The price cap means they would pay a maximum of £1,137, but…

If they switched to the cheapest deal on the market they would save a further £259!

Price cap level from Ofgem. Cheapest deal from Energylinx.

Alan Whitehead, the shadow energy minister, has also warned that higher bills for some customers could be a “perverse outcome” of the cap.

For those paying more than the cap – your prices will decrease.

But for those paying less than the cap – your prices could increase.

Either way, default standard tariffs are still the most expensive and there are much cheaper deals on the market.

Ofgem recommends that people switch from default tariffs, saying substantial savings are available.

Even the energy regulator, Ofgem, has suggested that you ‘should shop around for a better energy deal.’ This is because even with the cap, they too know there will be cheaper deals.

What does the price cap research show?

These are the top 5 worst deals more expensive than the price cap:


Supplier Name

Tariff Name


Tariff Type

Green or not green

Exit fee

Exit fee



Ebico Prime Fixed 18 v2




18 months



First Utility

StuRents Fixed February 2020




Until Feb 2020



First Utility

First Control December 2020 v3




Until December 2020




Ebico Prime Fixed 18 v2 – Paperless




18 months



PFP Energy

Simple Clear






How are energy suppliers allowed to be more expensive than the price cap?

Standard variable tariffs (SVT) are notoriously the worst value deals on the market. This is an energy company’s default tariff and this is the one which has to comply with the price cap.

However, other variable deals or fixed deals are not capped – These are the deals you now have to look out for!

I thought fixed deals offer price protection?

Fixed deals are thought to be the safe option. The pros of a fixed deal are that you have a fixed rate throughout your contract, meaning you are never affected by price rises.

However, 59 of these fixed deals are frankly very expensive. 

The priciest is £175 higher than the cap and around £345 more than what you could pay on the cheapest deal.

How can I save money on my energy bills? 

Mr. Money, from The Sun (news) called Look After My Bills “A clever way to get cheaper deals from power giants” 

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