The energy price cap is set to come into force on 1 January – Centrica says it is not trying to delay the start date, but wants to change how the cap is calculated.
It is seeking a judicial review, which is a court proceeding in which a judge reviews the lawfulness of a decision made by a public body, in this case Ofgem’s decision of how the energy price cap will be set.
The cap, which was announced on 6 November, will mean that a typical user paying by monthly direct debit will pay no more than £1,137/year on average. But MoneySavingExpert founder Martin Lewis has stressed that this figure is NOT a cap on the price you pay, and energy customers with higher usage could pay more than this.
See Martin’s Warning: Energy price comparison savings are WRONG due to the price cap blog for more info.
To see if you can save on your energy bills, do a comparison using our Cheap Energy Club.
How does the price cap work?
The price cap was initially announced in October 2017 by Prime Minister Theresa May, with the aim of tackling the amount consumers have been overpaying the big six energy firms, estimated at £1.4 billion a year by the Competition and Markets Authority.
When the cap comes into effect in January, it will limit the maximum amount suppliers can charge for each unit of gas and electricity you use – and a maximum daily standing charge (what you pay simply to have your home connected to the grid).
The current calculation for January’s price cap means a typical user on a standard or default tariff would pay a maximum of £1,137/yr on average, paying by monthly direct debit, or £1,221/yr for non-direct debit households – though your maximum will vary depending on where you live and how much energy you use.
Yet this is just the initial level. The level of the cap is set to be updated at the beginning of April and October – and with wholesale energy prices rising over the last year, Ofgem has warned it may need to put up prices in April.