The safeguard tariff, also known as the energy price cap, was introduced by Ofgem to prevent vulnerable homes from being charged too much for their energy bills.
Thanks to the safeguard tariff, low income homes aren’t paying any more than they should be for their energy bills.
What is the Safeguard Tariff?
The safeguard tariff was started by Ofgem and puts a cap on how much an energy supplier can charge eligible homes per kWH used.
Energy suppliers providing energy to homes that are part of the safeguard tariff are able to charge less than the level of the tariff but not more. The bill still reflects how much energy is being used around the home so if you use more you’ll pay more, the total bill isn’t capped.
The level of the safeguard tariff (which is revised every 6 months) reflects how much it costs the supplier to provide your home with energy, protecting vulnerable homes from being charged too much.
Am I Eligible and How Do I Apply?
The safeguard tariff applies to homeowners that:
- Receive Warm Home Discount
- Pay for gas or electricity in advance using a prepayment meter (this includes token-operated meters)
If either of these is the case then your energy supplier has to ensure that any charges to you fall below the current safeguard tariff. This is all done automatically so you don’t need to apply.
If you have a prepayment meter but it’s ‘fully interoperable’ then the safeguard tariff won’t apply to you.
Why Was an Energy Price Cap Introduced?
The safeguard tariff was brought in originally by the the Competition and Markets Authority (CMA) to protect households using prepayment meters for their energy. The CMA found that customers using prepayment meters have fewer choices when it comes to the tariff they’re on and often ended up paying more than customers who paid in other ways. It was also found that prepayment customers are more likely to be vulnerable and in debt.
Although the safeguard tariff was brought in to protect homes on prepayment meters, it has since grown and now also covers customers receiving the Warm Home Discount.
What is the Warm Home Discount?
The Warm Home Discount has been put into place to give eligible customers a one-off annual rebate on their electricity bills of £140. This isn’t paid to the homeowner, just discounted from the bill between September and March.
You’re eligible to receive this rebate if you fit either of the following criteria:
- Receive the ‘Guarantee Credit’ element of Pension Credit (core group)
- Are on a low income and meet the energy supplier’s criteria (broader group)
Suppliers with over 250,000 customers have to provide Warm Home Discount by law so this includes:
- British Gas
- Scottish Power
- First Utility
- Co-op Energy
- Utility Warehouse
- Economy Energy
- Flow Energy
- Spark Energy.
A handful of smaller suppliers take part in the scheme voluntarily so it’s worth checking with your supplier even if they’re not on the list above.
What are Prepayment Meters?
Prepayment meters allow customers to pay for their gas or electricity before using it, in a pay-as-you-go fashion. There are different types of prepayment meter which all require alternative methods of payment which can be either coins, tokens or with a smart card.
The types of prepayment meter that are eligible for the UK energy price cap are those that operate with coins or tokens. Coin prepayment meters take coins, while tokens can be topped up at a local shop or post office.
How is the Safeguard Tariff Set?
The level of the safeguard tariff is set by Ofgem and gets updated every 6 months, once in April and then again in October. The level is worked out by estimating how much it costs an energy supplier to provide gas and electricity to Warm Home Discount or prepayment customers. The tariff can go up or down to reflect the rise in wholesale costs of gas and oil.
Is the Tariff Different Depending on Where I Live?
Depending on where your home is, the level of the safeguard tariff will differ. This is because it costs varying amounts to transport the energy to different regions. By doing this, the energy suppliers have more incentive to be efficient by setting up their generators closer to towns and cities, which cuts down those transportation costs. Customers could then benefit from cheaper tariffs.
Will the Safeguard Tariff End?
Homes with a prepayment meter can benefit from the Safeguard Tariff until the end of 2020 to coincide with the end of the government’s smart meter roll-out. The government are planning to introduce wider price protection but if it’s not in place by the upcoming winter months (2018/19) then a further 2 million vulnerable homes will be able to benefit from the safeguard tariff.
Current Safeguard Tariff Plan
As we mentioned earlier, the safeguard tariff is updated every 6 months, find out how the tariff has changed and what the current plan is with the table below.
|Period||Electricity (non-Economy 7)||Electricity (Economy 7)||Gas||Dual fuel (non-Economy 7)|
|1 Apr 17 – 30 Sep 17||£547||£614||£503||£1,050|
|1 Oct 17 – 31 Mar 18||£528||£589||£503||£1,031|
|1 Apr 18 – 30 Sep 18||£562||£635||£527||£1,089|
|1 Oct 18 – 31 Mar 19||£581||£661||£555||£1136|
This table is based on averages from the Ofgem website during the summer of 2018.
An Economy 7 tariff will give you a cheaper electricity rate during the night, with a normal one during the day.