Is there a cap on electricity tariffs? 31 January at 6:26PM in Energy 5 replies 315 views

BoyJohn811

HI, I was wondering if someone could help me to explain how the energy cap is applied on electricity tariffs.

I live in the West Midlands and only pay for electricity with Bulb (now transferred ownership) and have Economy 7 smart meter. My current tariff is day: 38.5098p, night: 26.8958p, standing: 49.2376p. My understanding was that there was no point of switching as all companies were charging the maximum tariff they could. However, upon doing some search online, I see different unit prices (e.g. EDF offers day: 48.479p, night: 13.083p, standing: 49.234p). This plan would be much cheaper for me as I use storage heaters during the night and that is most of my usage. Yet another company also offers a night rate for 17.73p (Octopus), which is, again, much cheaper than my current night rate.

How is then the current price cap applied then? Based on an average usage for a household and depending on the individual case, switching is still beneficial (like in my case with a Economy 7 meter)?

Thank you very much.

Gerry1

With single rate, most suppliers charge almost exactly the same, so the only reasons to switch would be better customer service or if your supplier refuses to offer variable direct debit but another supplier does.

However, E7 rates vary quite a lot, both between suppliers and between regions.  A cheaper night rate will correspond  to a dearer day rate.  Therefore you need to establish your annual usage based on actual meter readings and then shop around and switch to the best tariff you can find.

You might even find that it's worthwhile to have E7 in the winter and single rate in the summer. You can do this without a meter change, although not all suppliers offer single rate billing with an E7 meter.

pochase

All the prices you quoted work out to about the same if you use 4200KWh per year at 58%/42% day to night ratio.

The more you use at night the more cheaper night rates like EDF are interesting.

Each supplier is allowed to set the price for day and night rates as they want as long as they follow the above rule. Some have a huge difference between the two rates, for some the rates are almost the same.

So yes, depending on your usage certain suppliers are better fro you than others. For some regions EDF even has night rates 6 to 7p, but very expensive day rates.

dunstonh

My understanding was that there was no point of switching as all companies were charging the maximum tariff they could. 

No, that is not correct in respect of multi-rate tariffs.   There is still a competitive market for E7 as some suppliers have gone for very low night rates and higher day rates whilst yours has gone for a less favourable night rate.     

Think of it like a see saw.   If you push down on one side, it goes lower but the other side goes up.   That is effectively how E7 works.  However, suppliers can decide how much they want to push down one side (the night rate).  

The EDF tariff is great for high off peak ratios.  I switched to EDF earlier in the month because 7p off peak was a no brainer for us with 67% off peak use.

Scot_39

BoyJohn811 said:

HI, I was wondering if someone could help me to explain how the energy cap is applied on electricity tariffs.

I live in the West Midlands and only pay for electricity with Bulb (now transferred ownership) and have Economy 7 smart meter. My current tariff is day: 38.5098p, night: 26.8958p, standing: 49.2376p. My understanding was that there was no point of switching as all companies were charging the maximum tariff they could. However, upon doing some search online, I see different unit prices (e.g. EDF offers day: 48.479p, night: 13.083p, standing: 49.234p). This plan would be much cheaper for me as I use storage heaters during the night and that is most of my usage. Yet another company also offers a night rate for 17.73p (Octopus), which is, again, much cheaper than my current night rate.

How is then the current price cap applied then? Based on an average usage for a household and depending on the individual case, switching is still beneficial (like in my case with a Economy 7 meter)?

Thank you very much.

Yes there is a seperate Ofgem cap for multirate - its a nominal £3000 for 4200 kWh of power - as opposed to the £4279 for duel fuel (12000kWh gas and 2900 kWh SR electric).

The EPG fixes the SR electric to it's regional price level - and the same average discount (was 17p, now 31.8p ex VAT) is applied to the nominal multirate table.

So that £3000 for 4200 kWh - becomes c£1600 - I believe - but only at a notional day 58%/night 42% ?.

EDF tables etc suggest the 33.4p (31.8p+VAT) doesn't always get applied equally to their cheapest night rates

https://www.edfenergy.com/sites/default/files/government_energy_price_guarantee_prices._standard_variable_deemed_and_welcome._credit_meters.pdf

Or pre discount

https://www.edfenergy.com/sites/default/files/ofgem_default_tariff_cap_prices._standard_variable_deemed_and_welcome_-_credit.pdf  

e.g EM DD

N 33.92-5.88=28.04, D 89.29-51.92=37.37.

Do the same in eastern DD E7 for instance - and it's the same on both day and night.

@dunstonh

"Think of it as a see saw" - a good analogy - the balance between day and night rates is still up to the supplier.  Ofgem only sets the total price - the £3000.

Get your actual day / night usage - and use rates from some quotes.

With NSH - and against you fairly level split - you may be able to save.

BoyJohn811

Thank you very much for all the replies, it makes perfect sense now. I will calculate my night usage and see which company is more favorable.

All the best.