Energy price cap extended until end of 2021

The energy price cap will be extended until the end of next year, the government has announced.

It means around 11 million households will continue to save on gas and electricity bills, according to the Department for Business, Energy and Industrial Strategy (BEIS).

It said the cap had saved customers around £1bn - around £75 to £100 a year for a typical household on a default energy tariff.

Four million more households with pre-payment meters on default tariffs will also come under the cap's protection in January.

Business and Energy Secretary Alok Sharma said: "The energy price cap has been vital in ensuring customers do not pay too much on their bills, which is why we are keeping it in place for at least another year.

"Switching energy supplier to find the best value deals is still the best way to save on bills, but this government is determined to make sure all customers are treated fairly and get the protection they deserve."

The cap on bills started in January last year and was aimed at ending what Theresa May, prime minister at the time, called "rip off" prices.

It is calculated using a formula that includes wholesale gas prices, energy suppliers' network costs and costs of government policies, such as renewable power subsidies.

It is adjusted twice a year and is aimed at helping those who are least likely to shop around, such as elderly people.

BEIS said around 2.8 million electricity and 2.1 million gas customers switched suppliers in the first six months of this year.

But this leaves more than half of households on standard variable or default tariffs where, without the cap, they would "likely still be paying excessive charges".

In August, energy regulator Ofgem recommended extending the cap, as it announced the level for October 2020 until March 2021 would be £1,042 for typical users paying by direct debit.

Ofgem's chief executive, Jonathan Brearley, said it would "continue to protect consumers in the difficult months ahead as we work with industry and government to build a greener, fairer energy system".

Richard Neudegg, head of regulation at Uswitch.com, said: "The only way to escape high bills and ensure you're not paying more for your energy than you should is by switching to a cheaper deal."

He said there was currently a £186 difference between the price cap and the cheapest fixed deal on Uswitch.com, describing this as a "significant saving for anyone who is out of contract with their supplier".

Peter Earl, head of energy at Comparethemarket.com, added: "There is a real risk that the British public interpret the government's extension to the price cap as an endorsement that the cap is an affordable price to pay for energy, when it reality it should be considered the absolute ceiling that people pay.

"There are currently 191 energy tariffs on the market cheaper than the £1,042 price cap, and as the temperature drops and people turn the heating up a notch or two, switching to a competitively priced one or two year fixed-rate deal is an effective way for households to lock-in a cheaper energy deal."