UK HOUSEHOLDS could collectively save in the region of £1 billion a year – roughly £76 each – when a government-backed price cap that will limit how much energy companies can charge customers on standard variable tariffs (SVTs) comes into force in January.

The cap applies to dual-fuel SVT deals that see customers get both purchase both gas and electricity from the same energy supplier. The cap has been set at £1,137 a year for a typical household paying by direct debit.

Around 11 million households have SVTs, either because they have never switched supplier or because they have defaulted onto an SVT at the end of a fixed-term tariff.

Customers with high-charging firms will save the most after the introduction of the cap. For example, people on Scottish Power’s SVT, which is one of the costliest, are expected to save £120 a year. At the other end of the scale, SSE’s SVT customers are set to save around £60 a year, according to figures from industry regulator Ofgem.

SVTs are typically a company’s most expensive tariffs, with Scottish Power, for example, charging £1,257 a year on its SVT while also offering a Super Saver fixed tariff of £1,064 a year.

As the level of the cap will be reviewed in April and October, and may be increased to reflect rising wholesale energy prices, there is also no guarantee that a cap will lead to consumers being better off in the long term.

Richard Neudegg, head of regulation at price comparison site, said: “There is a very good chance that the price of standard energy tariffs will change several times over the next 12 months, and potentially for the worse rather than the better - so households on these deals should be wary of claims that they will save an average of £76 over the next year.

“The energy price cap will be reviewed and potentially changed next April, and rising wholesale costs may force the cap to be increased, meaning prices will go up for anyone on a standard tariff. It’s possible the same could happen come the next review in October, too.”

A cap for customers on pre-pay meters and those in receipt of the Warm Home Discount was introduced in 2017. It has since been increased twice because of the rise in the cost of wholesale energy and now stands at £1,136.

Experts are also worried that the cap could lull consumers into a false sense of security, causing them to miss out on even bigger savings.

Peter Earl at price comparison site Compare the Market said: “While it’s important that households are protected from high SVT costs, people should know that the price cap level is likely to be far higher than most would pay if they switched to a fixed tariff.

"We are worried people will stop reviewing their energy tariff as a result of the price cap. They should not take this announcement as a signal to disengage from the energy market.”

Ofgem has also urged households to continue to search the market for the best deal after the introduction of the cap.

Its chief executive Dermot Nolan said: “Consumers who want to cut their bills further should shop around for a better energy deal and while the cap is in place we will continue our work to make this as easy as possible.”

The cheapest deal currently on the market is Pure Planet’s 100% Green variable deal, which at £921 a year for the average user is £216 cheaper than the price cap.

The best-buy fixed deal, meanwhile, is Toto Energy’s Online Fixed Saver, which would cost the average household £980 a year, £157 below the cap.

Mr Neudegg said: “Customers may well be questioning why they are leaving their bills in the hands of the regulator. The only way to escape the cap trap is by coming off standard variable tariffs altogether. For peace of mind this winter energy customers can switch to a cheaper fixed deal now, securing the rates they will pay for at least 12 months.”

The cap does not set a maximum amount a household will pay as actual bills will always reflect the amount of energy used.

The cost of a fixed tariff will also vary according to usage – these deals are fixed in that the cost of each unit of energy used is guaranteed not to change during the term, regardless of what happens to prices elsewhere in the market.