Energy prices from January, and what they mean for you

If you’re on a variable tariff, like our Flexible Octopus, the Ofgem Price Cap protect the price you pay.

The price cap specifically applies to variable tariffs because they aren’t fixed against the volatility in the energy markets. Different suppliers can refer to these tariffs in a number of ways; standard variable tariff (SVT), non-fixed, etc. At Octopus our variable energy tariff is called Flexible Octopus.

If you’d like to confirm which tariff you're on, and details like your current prices and contract dates, you can see them on your online account (scroll a little way down and look at the details below your property address).

You can read more about the energy price cap and whether it affects you on Ofgem’s website.

Our Flexible tariff will have slightly different unit rates and standing charges based on your payment method. The £80 isn’t a flat discount for Direct Debit customers (or a charge on non-Direct Debit customers) – it’s the typical savings an average home could see over a year on the cheaper Direct Debit rates.

If you change how you pay, our system will pick that up and adjust your rates automatically, so if you don’t have a Direct Debit right now, it’s super easy to access the cheapest prices. All you need to do is set up a Direct Debit online and we’ll do the rest.

Why are tariffs sometimes cheaper if I pay by Direct Debit?

Not having a Direct Debit (and instead paying on receipt of your bill) costs us a lot more in admin.

We don't think it's fair to make everyone cover that extra cost, so we do offer a cheaper rate for those who choose to pay by Direct Debit, which costs us less to manage.

We run an incredibly efficient business, which means you’ll still get a great price if you choose to pay a different way – around £130 cheaper than the April Price Cap.

No: this figure is not the absolute maximum a customer could pay.

If you’re affected by the price cap, the protection you receive is relative to how much energy you use.

Ofgem calculates the price cap based on the yearly usage of a typical medium consumption home (that's 2700 kWh of electricity and 11500 kWh gas per year). It represents the maximum amount Ofgem considers fair for energy suppliers to charge customers on variable tariffs.

This figure is used by suppliers to apply the price caps protection against each customer's actual usage. Put simply: if you use more - or less - energy than that typical home, your own yearly energy costs on a tariff priced at the maximum rates may be higher - or lower - than that £1,928 figure from Ofgem.

Ofgem has recently reduced the 'typical domestic consumption values', in other words, how much they estimate an average household uses in energy per year. This is because households in the UK have reduced their energy usage over the past year and this has impacted the 'average' amount a household uses and therefore how much they pay on their energy bills. This means that the price cap looks like it has fallen more significantly as it takes into a account a fall in average energy usage as well as a fall in unit rate. You can read more here.

The price cap sets a maximum rate for:

• Energy units: the price suppliers can charge variable tariff customers per unit of gas and electricity you use
• Daily standing charges: the price suppliers can charge per day for ongoing costs, like paying the companies who manage distribution networks, operating costs, etc.

Ofgem have shared that on average - for customers paying by direct debit - the unit rates will be:

Electric:

• 28.62 p / kWh unit
• 53.35 p / day standing charge

Gas:

• 7.42 p / kWh unit
• 29.60 p / day standing charge

Important: these are averaged figures from across all regions in the UK. As certain costs vary, e.g. what transmission network fees we pay in an area, the actual maximum unit rate varies depending on region. There are other factors too: different maximum rates for Economy 7 tariffs (which have a day and a night price) and prepayment meters.

More information on other payment methods will be added to this page as it becomes available.

Though green energy is cheaper to generate, on the market it's sold at the same, higher price of gas and other fossil fuels. That's down to the way the market's set up. It's similar to how houses are sold based on the price of neighbouring homes, rather than what it costs to build.

It's mainly set up this way because the grid always has to be balanced: the UK's energy needs (or 'demand') matched perfectly with an equal amount of power supply. The grid calls on all different types of power, from gas to renewables, to help with its crucial balancing job.

It wouldn't be entirely fair to pay some energy generators less for their power when they're fulfilling the same important function. This means that the highest price ends up setting the market price. When gas prices are high, all electricity prices are too.

We’re pushing for a system in which more and more of the electrons are green ones – because the more green power in the grid, the less we need to rely on expensive, dirty gas imports to meet our energy needs at all.

If you’re on a fixed tariff, the first thing to know is that the price cap doesn’t affect your current energy contract.

We’ll always email you in advance of your fixed tariff coming to an end.

If you’d like to confirm your current prices and contract dates, you can see them on your online account (scroll a little way down and look at the details below your property address) or on any PDF energy statement. It’s usually on the second page, near the top of the breakdown for your electricity and / or gas charges for the period.