The energy price cap was typically introduced to regulate the energy rates. It controls the price of gas and electricity charged to domestic customers by energy suppliers. The price cap applies to you whether you’re on a default energy tariff or a standard variable rate. But it doesn’t usually apply to fixed-rate tariffs. Keep reading to learn more!

Does the Price Cap Apply to Prepayment Meters?

According to Utility Bidder, there’s usually a separate price cap for those who’re on prepayment tariffs. Introduced in 2017, the energy price cap deters business gas and electricity supplier from setting their prices above a stated level. It’s often reviewed in April and October. It currently sits at 1156 pounds for a household with average usage.

The price cap also stipulates a maximum daily standing charge. This refers to the amount that households are required to pay for the service of delivering power to their home. It’s also important to note that the price cap usually varies from one state to another. So, the price cap charges will be applied differently depending on where you're located. The variations often result from the costs of transporting energy to your destination.

How Is It Important?

The price cap aims to assist customers who’re on a prepayment tariff to pay an affordable price for their energy. Plus, it’s aimed at protecting them from being overcharged. The price cap will also drop when wholesale costs drop, and energy costs might come down. The price cap ensures that customers won’t be hit with an exorbitant price hike if costs rise.

But as much as the price cap can save you substantial amounts of money, the truth is that you can actually make better savings by moving to a more competitive tariff. Switching to a fixed rate tariff could save you thousands of dollars a year.

Are you currently using a prepayment meter? Well, you might benefit from installing a credit meter in your home or office. Paying your energy by direct debit can be extremely cost-effective.

How to Minimize Cost

Remember, the energy price cap won’t regulate your total energy bill. Thus, if you start utilizing more energy every month, your expenses will still increase.

If you’re currently using a prepaid meter, consider switching to a credit meter. This will allow you to pay your energy bills by direct debit. But this move will depend on your credit rating. Once a new meter is fitted, you can then move to a cheaper tariff. Moving from a variable rate tariff to a competitive fixed-rate can also be an incredible way to save money.

Final Thoughts

Electricity is essential for every home or business. There’s barely anything you can do without electricity in today's tech-driven world. And being an important resource, energy has become very expensive nowadays. That’s exactly why the energy price cap was introduced. The above article expounds more on the energy price cap and how it can help you minimize your energy costs.