Why the Price Cap Isn't Protecting Households

Standard variable tariffs (the ones that have a price cap applied) were only ever designed to act as a default or backstop between fixed tariffs. The price cap was introduced to protect consumers who found themselves in between fixed tariffs and being charged high prices by suppliers. The price cap for standard variable tariffs was designed as a ceiling for energy unit rates, not a best value safeguard for households, but sadly that has been misunderstood by millions.

Ironically, the former MP who called for the protection under a price cap - John Penrose - says the price cap policy “isn’t fit for purpose,” warning that it distorts competition and keeps prices artificially high.

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Standard Variable Tariffs Are a Backstop, Not a Choice

Energy suppliers can buy energy for the households they supply at a far better rate if households are on a fixed tariff than if they are on a standard variable tariff. Suppliers wish their customers would fix, but sadly the price cap has created a false sense of security, which is costing consumers billions each year.