How does the energy price cap work, as it comes into effect today?

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With the energy price cap rising today on Friday, April 1, how does the  process actually work? (PA)
With the energy price cap rising today on Friday, April 1, how does the process actually work? (PA)

After weeks of preparation and measures of financial support being offered, the energy price cap rise comes into effect from today (Friday, April 1), with it rising by 54%.

It means energy prices will rise by £693 a year for millions of households after regulator Ofgem hiked the price cap on bills to £1,971.

The energy regulator is responsible for the energy price cap which limits how much providers can charge customers on their energy bills.

This increase follows a 12% rise in October and will take effect this week, and is one of many financial pressures facing households as the cost-of-living crisis continues.

People might still have questions on how exactly the price cap works now that it has come into effect.

Bournemouth Echo: Energy bills are set to rise by £693 a year for many households (PA)
Bournemouth Echo: Energy bills are set to rise by £693 a year for many households (PA)

Energy bills are set to rise by £693 a year for many households (PA)

How the energy price cap works

As stated by the Money Saving Expert website: "The price cap sets a limit on the maximum amount suppliers can charge for each unit of gas and electricity you use, and sets a maximum daily standing charge (what you pay to have your home connected to the grid)."

This means that there is no upper limit to what a household would pay, as if you use more energy you pay more, and if you use less energy you pay less.

As the MSE website states: "It only applies to providers' standard and default tariffs, so if you're on a fixed-term energy deal, the cap doesn't apply. If you've not switched in the last year or so, it's likely you're on a capped tariff."

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