What is capping?

formidablelady

If you are paying say £100 a month and you cap at 7% does this mean you pay £107 per month for the term its capped or does it mean you pay no higher than the £107 but if the rate went down you would pay the lower amount plus 7%. So if it was £50 you would pay £53.50? I have tried to cap my electricity twice with British Gas and they keep telling me conflicting things! Are they trying to put me off?

Cardew

With BG you generally pay a premium 'up front'.

However this premium is based on the price of each kWh not your monthly payment.

i.e if the price of a kWh was 10p with a 7% premium you would now pay 10.7p.

However that can vary by them altering the amount of tier 1 units and the price of those units.

So in general terms you will be paying 7% more straight away.

formidablelady

Thanks for the reply. But does this mean I wil pay £107 per month until 2010 or if by some miracle the price went down so would my payment plus the premium i capped at?

Cardew

As far as I am aware BG do not offer capped tariffs and there are none listed on their website.

The only BG tariff that runs until 2010 is 'Price Protection 2010'

This is a fixed price tariff that runs until March 31 2010.

However this tariff was introduced in 2005 and was not offered after late 2005(might have been early 2006)

You paid a premium for each kWh over the 2005 BG standard tariff and the prices will remain at that until 31/3/2010 - regardless of other BG prices increasing or decreasing. It is now the cheapest BG tariff.

The reason why there is no point in quoting your DD payment is that if your consumption increases or decreases you will obviously pay more or less each month.

Thr principle of a capped tariff is that if they cap it at 7% above the standard tariff, it will not rise above that figure.

e.g. Present price is 10p for a kWh on standard rate. That capped at 7% means that it will cost 10.7p for a kWh. It will never increase above 10.7p.
If the standard rate fell to 8p then the capped rate would fall to 8.56p.

In the unlikely event that £100 a month covered exactly your gas/electricity consumption on the standard tariff then it would rise to £107 and stay at that figure as long as in future years your consumption remained exactly the same.
In the unlikely event that standard rate prices dropped by, say, 10% then your payments would also drop by 10%