As the table above shows, the gap between the cheapest and most expensive regions is set to widen after the Ofgem price cap comes into effect.
Currently customers in the East Midlands region pay the least for a typical big six tariff at an average £1,196/yr, compared with £1,245/yr in the South West – a difference of £49/yr. Yet under the upcoming price cap, customers in the South West will be charged a typical £62/yr more than those living in the new cheapest region, Yorkshire.
‘Penalised for living in the “wrong area”‘
MoneySavingExpert.com deputy editor Guy Anker said: “The regional variations highlight what is a postcode lottery whereby some are harshly penalised simply for living in the ‘wrong area’.
“It’s vital anyone on a standard tariff urgently checks if they can get a better deal before the bitter cold hits, and these figures shine an even brighter light on the huge sums many waste by sticking with expensive tariffs.
“A price cap may be coming, but while it makes standard tariffs fairer, it doesn’t make them good. Millions could still save £100s per year by switching.”
How will Ofgem’s energy price cap work?
The cap will be in place from 1 January 2019. Nationally, it will be set at an average £1,137/yr for a typical household paying by direct debit, or £1,221/yr for non-direct-debit households, though as the table above shows, it’s the price cap in your region which really counts.
It’s worth noting these figures are NOT a cap on the total amount you pay, but rather a cap on the rate charged. The cap on your annual bill is linked to usage, so the figures in the table above are based on someone with typical annual usage of 12,000kWh of gas and 3,100kWh of electricity. Someone with higher usage would see a higher cap – use less and your cap will be lower.
The level the price cap’s set at will last only until the end of March 2019, when it will be reviewed, and it’s predicted to then rise to a new higher level for the next six months. It will continue to be reviewed twice a year until 2020 when Ofgem will recommend on an annual basis if it should continue, up to 2023.
The cap applies to standard variable and default tariffs, but not fixed rate tariffs.
What does Ofgem say?
A spokesperson for Ofgem told us: “Ofgem’s methodology to set the level of the default tariff price cap is designed to reflect the underlying costs of supplying electricity and gas.
“The level of the cap varies by region, mainly because of regional variations of network charges which reflect the cost of transporting energy for each region.
“Thanks to the price cap, customers on default tariffs will save around £76 per year based on a national average when it is introduced on 1 January.
“The price cap saving will vary by region because some suppliers are currently setting regional price differentials in a way that doesn’t reflect their costs based on our methodology for the price cap.
“However all customers on default tariffs will still make significant savings on average regardless of where they live.”