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Consumer attitudes to the energy price cap

Background

In November 2018, Ofgem (the energy market regulator) confirmed the introduction of a price cap on standard variable and default energy tariffs from 1 January 2019.

Recent Which? analysis has looked at changes in the availability of cheaper fixed-price deals during the course of 2018, and found that whereas in January 2018 there were 77 dual-fuel tariffs costing less than £1,000 a year, in December there were just eight.

Ahead of its introduction, Which? also asked consumers about their awareness of the price cap and how they thought the price cap would affect their overall bill.

Overview

Overall, just under half of respondents (48%) were unaware of the price cap being introduced, with a slightly smaller proportion (45%) aware of the price cap’s introduction and a further 8% did not know.

In terms of how they thought their bills would change as a result of the price cap, most respondents - four in ten (41%) - thought it would have no impact. Two in ten (20%) thought their bills would increase and just under one in ten (9%) thought their bills would increase.

Looking at how expected bill impact varies with prior awareness of the price cap, those that said they were already aware of the price cap were more likely to think that their energy bill would stay the same after its introduction (53%).

In contrast, among those that were not previously aware of the price cap, four in ten (40%) did not know whether their bills would change as a result of the price cap, and only a third (32%) thought that their bills would stay the same.

Variations in awareness of energy price cap

Awareness of the price cap generally increased with age, with seven in ten (68%) people aged 65 years and above aware of the price cap, compared to just a third (32%) of people aged between 18-34 years.

The price cap is intended to benefit those on standard variable or default tariffs. Those who have not made an active choice of supplier or tariff are more likely to be on such a tariff, so we asked respondents whether they had switched to select their current supplier, if they had always been with their current supplier or if they had inherited their supplier when they moved home.

In looking at how awareness changed amongst these groups, those who had switched and selected their current supplier were more likely to be aware of the price cap already (50%), compared to those who had either always been a customer of their current supplier (43%) and those moved home and inherited their current supplier (37%).

 

Variation in expected impact of the price cap

Despite a bigger awareness of the price cap among those aged 65 years and above, the majority (56%) think the price cap will have no impact on their bill, with only 4% expecting a decrease in their bill.

In comparison, more people aged between 18-24 years expect the price cap to have some impact on their bill. Three in ten (31%) think there will be an increase to their bill, and nearly one in five (17%) thinks there will be a decrease in their bill.

People have different expectations about the impact of the price cap, depending on how satisfied they are with their energy supplier. For those dissatisfied with their energy supplier, a third (33%) of people expect their energy bill to increase after the introduction of the price cap. In comparison, for those satisfied with their energy supplier,  just a fifth (18%) expect their bills will increase after the introduction of the price cap.

Looking at differences by switching activity, those who had switched and selected their current supplier were more likely to expect their bill to remain the same after the price cap is introduced (48%), compared to those who had either always been a customer of their current supplier (36%) and those moved home and inherited their current supplier (34%).

Expectations about bills decreasing after the introduction of the price cap also varied among these groups - only 7% of those who switched/selected their supplier thought their bills would decrease after the price cap was introduced, compared to 13% for those who had always had the same supplier and 12% for those who inherited their supplier when they moved house.

Finally, there were also differences in expected impacts from the price cap depending on whether customers were on fixed or variable tariffs. Nearly half (45%) of those on fixed tariffs expect their energy bill to stay the same after the introduction of the price cap. In comparison, around a third (35%) of those on variable tariffs expect their bills to stay the same after the price cap is introduced.

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