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Variable price change, OVO Simpler Energy Plan and the Ofgem price cap

  • 23 February 2021
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Variable price change, OVO Simpler Energy Plan and the Ofgem price cap
Userlevel 7

Updated on 03/02/22 by Jess_OVO

 

Variable price changes and the new Ofgem price cap - Frequently Asked Questions

 

 

What is the price cap?

 

The energy price cap is set by Ofgem, the energy regulator, to put a limit on what energy suppliers can charge on variable plans. The cap takes into account costs energy suppliers are facing, while making sure prices are fair. It can go up or down – depending on the cost of wholesale energy. 

The price cap sets the maximum rate you can be charged per kWh of energy, on a variable plan. This is known as the unit rate. The price cap also sets the standing charge – this is the amount you pay per day to stay connected to the grid (covering the costs for things like power lines and pipes).

Using more energy will also cause bills to go up and it’s the other main factor that affects costs – whichever type of plan you’re on, whether it’s variable or fixed-rate. If you’re worried about your energy costs, we’re here to support you.

 

 

Why have energy prices risen so much?

 

The main cause is the rising cost of wholesale energy (this is the price we pay to buy energy from the companies that generate it). It’s more than doubled over the last year, and that huge rise has been driven by a number of things, including:

  • Countries returning to normal after lockdowns
  • And a decreased gas supply coming from Russia into Europe

 

 

How does the Price Cap affect my bills?

 

The price cap is set by Ofgem, and it puts a limit on the rates energy suppliers are able to charge on variable plans. The amount you pay will also depend on how much energy you’re using.

On 3rd February 2022, Ofgem announced an increase to the price cap rates, which will come into effect on 1 April 2022 – and prices will go up on our variable plan from this date.

Unfortunately, we aren’t able to give you a personalised projection of how the price cap affects your bills just yet. 

We’ll be able to start sending out new prices to our members who are affected towards the end of February – to let you know exactly how your bills will change. All members who are affected will have their new prices sent to them by 12 March 2022.

 

 

 

Will I ever pay more than the Price Cap?

 

We’ll never charge you more than the price cap, if you’re on our variable plan (Simpler Energy). It’s worth knowing that fixed-rate plans aren’t affected by the price cap.

It’s also important to be aware that the figure of £1971 (which is often used by Ofgem when talking about the price cap) is the average yearly cost of energy per household. If your home uses more energy than that, then the yearly cost will be higher.

The price cap is there to set the maximum rate you can be charged per kWh of energy, on a variable plan. This is known as the unit rate. The price cap also sets the standing charge – this is the amount you pay per day to stay connected to the grid (covering the costs for things like power lines and pipes).

 

 

Does this price change affect all members?

 

No, it only affects members on our variable plan, Simpler Energy. But if you’re coming to the end of your fixed-rate plan, then you might be affected by the price cap. This is because you’ll be automatically moved to our variable plan if you don’t fix your prices again. We’ll be in touch about your options, giving you all the information you need to decide what’s right for you.

 

 

Is there any support available if I’m struggling to pay for my energy?

 

There is help available if you’re struggling to pay your energy bills – both from us here at OVO Energy and from government schemes and charities as well.

There are many ways we can help – such as setting up a payment plan for you, which spreads the cost of your energy to make it more manageable. If you want to find out about payment plans, you can request one online here – we’ll take you through what you need to do, and ask you for some details.

Our dedicated team is also specially trained to support you. They can make sure you’re receiving any financial assistance from the government that you’re eligible for, and take you through payment support schemes that are available. 

You can find out more about these schemes and where to seek free, independent advice right here.

 

 

What can I do to help manage my energy?

 

Here’s some information that might help, when it comes to managing your energy account. You might want to take these steps before the price increase comes into effect. It’s easiest to manage all this through your online account. If you don’t have one you can set one up here.

  • Paying by Direct Debit could save you up to £120*. Price cap rates for Direct Debit payments are less expensive than for On Demand payments (where you pay your bill by cheque, for example). If you don’t have a Direct Debit set up already, you can do it here.
  • Sending regular meter readings. Without meter readings, we have to estimate your bills and this can mean they aren’t 100% accurate. You could be paying too much or too little for your energy. To stay up to date, submit your readings here if you’ve got a traditional meter. 
  • Getting a smart meter. Smart meters send readings for you, which means we know exactly how much energy you’re using – so your energy account is always up to date. They can also help you track your energy use in real-time. You can book your free appointment to get one installed here. 
  • Keeping an eye on fixed energy deals. Many of our members choose a fixed plan, for the peace of mind that comes with knowing prices are fixed for at least a year. If you’re interested in finding out more, head here. We’ll always tell you on your bill if you could switch to a cheaper plan with us. 
  • The Centre for Sustainable Energy can give you free, impartial advice on saving energy. Just visit cse.org.uk/ovoboost

*This saving is based on the estimated annual cost of an average, dual-fuel customer paying by Direct Debit, in comparison to paying On Demand. Actual savings will vary according to how much energy you’re using.

 

 

Got any more concerns not covered above? Check out our full FAQs here - or comment below to seek advice from fellow OVO community members. 

 


5 replies

Can we assume that as per April, any variable rate quoted now in July (at relatively modest levels) will inevitably rise when the price cap is removed in Sept, potentially towards the current 1 and 2 year fixed prices quotes?????

Userlevel 7
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Can we assume that as per April, any variable rate quoted now in July (at relatively modest levels) will inevitably rise when the price cap is removed in Sept, potentially towards the current 1 and 2 year fixed prices quotes?????

@Graham Duxbury 

I think that isn't an unreasonable assumption. 

The main caveat is that wholesale gas prices are very volatile and we don't know what interventions ofgem and the next Prime minister may make. 

Conwall Insight are very well respected in estimating the future price cap. They have been reliable in the past and are used by Martin Lewis of Money Saving Expert.

https://www.cornwall-insight.com/press/default-tariff-cap-forecast-climbs-further-as-ofgem-announcement-looms/

The price cap changes in October but is announced in August. There is due to be another price cap in January as we move to quarterly updates assuming nothing changes. Hence most of the changes to the October price cap are already "baked in" 

So lets take the January estimate of £3363

This is for the ofgem typical consumption values of 12000 units of gas and 2900 units of electricity. 

OVO one year current offer for my postcode for same ofgem typical usage would be  £3,366.84. So basically in line with the cornwall insight estimate. OVO quote  based on (inc vat). 

Gas standing charge 0.2752
Gas unit cost 0.1429

Electric standing charge 0.4444
Electric unit cost 0.4791

We use a bit less than the ofgem typical usage.

For me the two year OVO quotes are much more expensive than that. 

The fixed quotes give a lot of piece of mind. 

Are you going for a fixed plan or the ofgem price cap plan? 

 

Userlevel 1

I’m on a 2-year fixed plan coming to an end in December 2022. I was lucky in missing an increase in April. I am worried by about how much my direct debit will increase when my plan ends.

 

Unfortunately it’s bad timing as we are likely due a big hike to the price cap in October. The predictions are getting scarier almost daily.

whilst nobody knows exactly do yourself a favour and check the Martin Lewis website for what seems sound information.

Userlevel 1

It looks as though there will be a substantial increase in October, let’s hope Martin will put some pressure on the energy companies and the government. All I can see is that any funds added to your electricity account will be grabbed by the utility companies and increase their profits. Largest oil and

 gas producers made close to $100bn in first quarter of 2022, Shell made $9.1bn in profit, almost three times what it made in the same period last year, while Exxon raked in $8.8bn.

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