Ofgem has just announced that from April 1, the new price cap will be set at £1,690 which represents a £238 drop from the current price cap which is £1,928. This is a 12.3% fall relative to the previous quarter and also the lowest level since February 2022.
Read on to find out how the energy price cap works and whether the new British Gas "flex" fixed deal could be a way forward for you.
What is the energy price cap and how does it work?
The energy price cap determines how much energy suppliers can charge you for a unit of energy when you're on a standard variable tariff. It's set by Ofgem and it changes every three months. The current price cap is £1,928. This reflects how much a typical household that uses gas and electricity is likely to pay over the year. However, if you use more gas and electricity than a "typical" household you could end up paying more.
The price cap from April 1 has been set at £1,690.
Below, we've included a table of the latest energy price cap predictions based on data from energy analysts Cornwall Insight. Keep in mind that these are just predictions. Until a formal announcement is made by Ofgem, nothing is set in stone.
| Price cap | Rate |
| Current | £1,928 |
| April 2024 (announced) | £1,690 |
| July 2024 (predicted) | £1,465 |
| October 2024 (predicted) | £1,524 |
What is the British Gas Price Promise deal?
The British Gas Price Promise deal is one of the few fixed energy tariffs on the market right now. If you opt for the deal, you'll get a fixed-rate gas and electricity tariff that's around 12% cheaper than most price-capped energy tariffs, based on the energy price cap figures for January. For instance, if your annual bill is £1,928 (the current price cap), you'd save around £230 for the year. The deal lasts until May 27th, 2025 which means rates and charges will not change until then, with one notable exception.
If you opt for the deal right now, your deal will be adjusted in April to reflect the fall in energy prices. It's expected that customers who switch now will pay at least £1 below the April 2024 price cap (i.e. £1,689).
In a way, you get the best of both worlds - a significantly lower fixed tariff now and a price that, at the very least, matches the April price cap to your benefit. However, British Gas will only adjust your deal in April. This means that if prices fall again in July, as they're predicted to, you could end up paying slightly more for your gas and electricity from July onwards.
So, to sum up:
- You'll save money on the British Gas deal relative to the energy price cap figures for January and April 2024
- You might end up paying more than the price cap after July 2024
- You're locked in until May 27th, 2025
Exit fees are £75 per fuel, although you won't pay an exit fee if you switch to a different British Gas fixed tariff. So, if British Gas releases a more competitive fixed deal before May 2025, you'll be able to switch fee-free.
Is it worth going for the British Gas Price Promise deal right now?
If you switched to the British Gas Price Promise deal right now, you would likely pay less than the price cap until July. This means you are guaranteed to be on a better deal (compared to those that are capped by the energy price cap) until at least July. In July, British Gas won't be dropping your tariff, regardless of what happens to the energy price cap. As such you might end up paying slightly more from July onwards.
That being said, July is months away and the uncertain geopolitical climate we're facing means that the price cap predictions could change again before then. And, coupled with a prediction for a rise in October, the effective savings you'd get from waiting for a better fix might not be worth the anxiety of waiting to see what happens.
Given that British Gas will allow you to switch to any of its other fixed tariff deals for free, you might not lose out too much. But, of course, there's always the possibility that a wave of new fixed-rate energy deals, each more competitive than the last, might be just around the corner. The question is, are you willing to take that gamble and is it worth it to you? Take a look at our article 'Should I fix my energy prices' for the latest information on the energy price cap and whether it is worth going for a fixed energy tariff.
Can we expect more competitive fixed tariff deals in the near future?
When it comes to fixed energy tariff deals, it's been slim pickings over the last few years as a result of the energy crisis and the rise in wholesale energy costs. The entire energy market has been in turmoil with many energy suppliers going bust. In fact, in 2021 alone, 26 energy suppliers ceased trading and existing customers had to be moved over to other companies. All this meant that the vast majority of energy users were automatically moved to a different supplier and were often left on the supplier's standard variable tariff, albeit protected by the energy price cap and/or energy price guarantee.
Shopping for fixed-rate energy tariff deals wasn't possible because wholesale energy costs were so high meaning almost every energy tariff on the market that was not fixed was set at the energy price cap (the maximum the supplier could charge). We've seen a resurgence in fixed tariff deals over the last few months, but in truth, many of them couldn't beat the current energy price cap let alone account for predicted dips in prices in the coming months.
The British Gas Price Promise offer is a competitive deal that promises to keep your bills under the price cap at least until July this year. It is one of the very few deals on the market that is seriously worth considering right now. It's entirely possible, however, that British Gas will lead the way and encourage other major providers to offer better deals. If you prefer the certainty that comes with a fixed tariff and can afford the British Gas offer, then it's worth considering. If not, you might prefer to wait and see what happens in the next few months.
That being said, while we can't say for certain that there will be a flood of more competitive fixed tariff deals any time soon, there is a new price cap "tracker" deal on the market right now, and that's eON's 'Next Pledge' energy tariff. This could appeal to people who want a little more certainty when it comes to their bills but aren't ready to fix just yet.
The British Gas Price Promise Deal vs eON's Next Pledge
Although the British Gas deal is only one of a handful of energy providers to introduce a fixed tariff, eON's Next Pledge is a new, tracker-style variable deal that could appeal to some customers. If you want to make sure you don't pay more than the energy price cap for the next 12 months, it's worth considering.
Next Pledge promises that your energy prices will stay £50 below whatever the Ofgem price cap is for the next 12 months when you take it out. There is a £50 exit fee for dual-fuel users, however. It could work out well if you're not ready to fix and you believe the price cap will remain lower than the available fixed deals on the market. While current predictions seem to suggest this, it can be hard to know for sure what's going to happen to energy prices over the course of a year.
We discuss these (and other) energy deals in more detail as part of our article on the cheapest fixed-price energy deals here. It's worth reading and bookmarking as we update it frequently as new market-beating offers like the British Gas Promise Deal and eON's Next Pledge are released.
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