The 2020 Energy Price Wars Have Begun
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- Mar 10, 2020 4:08 pm GMT
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As the new financial year and changes to the Ofgem price cap rapidly approach, it was only a matter of time before energy suppliers began announcing price drops and increases.
In February and after Ofgem announced changes to the price cap, EDF became the first of the big energy suppliers to announce that it was cutting prices for customers on its standard tariffs.
However, prices remain as close to the price cap as possible. Hot on its heels came the other big players who have announced similar cuts that are as close to the cap as possible.
What is the Price cap?
The energy price cap limits the max amount energy suppliers can charge their customers for each unit of gas and electricity they use and sets the maximum daily standing charge.
However, if a consumer uses more gas and electricity than usual than the amount, they pay will reflect that. The cap is reviewed twice a year with any changes introduced in April and October.
The price cap is set to remain in place until the end of 2020, but Ofgem will be able to recommend on an annual basis if it should remain in place until 2023.
The reduction in the energy price cap comes as energy wholesale prices drop due to an oversupply of gas in the market.
Prices have further been impacted over fears over the rapidly spreading Coronavirus and the economic slowdown that has resulted in China and elsewhere.
If the virus becomes a full-blown global pandemic, we could see prices dropping further.
Some observers were expecting a much bigger drop in the price cap but other costs such as operating costs, environmental schemes, network charges and expenses as a result of the ongoing smart meter roll out.
Enter the challengers
While the price cuts by the big suppliers typically constitutes a saving of £16 per year due to them sticking close to the price cap, the smaller challenger energy prices are seizing the opportunity to undercut them and provide them with much larger discounts.
Some deals on offer could save a customer as much as £380 per year on the absolute cheapest deals.
Challenger suppliers such as Bulb have announced deeper gas price cuts which will see its consumers saving £56 on average. Other challengers are likely to announce similar cuts over the next few weeks.
Customers have never had so much choice or opportunity to make savings to their energy bills thanks to the increased competitiveness in the energy supplier market.
According to consumer group Which there is now over 78 tariffs on offer that are priced under £1000 per year.
In January 2019 there were just 12 such tariffs available.