Home The energy price cap extension and the impact on energy retailers

The government announced in October that the energy price cap has been extended until the end of 2021, in order to support vulnerable and struggling consumers  affected by the coronavirus pandemic.


The energy price cap is at its lowest level

First introduced in January 2019, the price cap has been recently reviewed and reset to its lowest level in October 2020, at £1,042 a year.  The price cap is reviewed six-monthly by industry regulator, Ofgem. To date, the price cap is estimated to have saved British consumers over £1bn a year since it’s been in place.


Why is the price cap lower than ever?

The price cap was introduced by Ofgem in January 2019 in order to protect consumers from being over-charged energy prices. In other words, it limits the amount an electricity supplier can charge a consumer per unit of electricity consumed. Covid-19 has meant that consumers need more protection from rising energy prices – in particular, the elderly and the vulnerable – and so the cap has been reduced further, which is set to remain until the end of 2021.


What does this mean for the energy supplier?

Whilst this is great news for the British public, who have saved on average £75 – £100 per year since the introduction of the price cap, in an industry that is already challenging for energy suppliers, this is another factor that will inevitably affect profit margins. It’s very difficult for the energy supplier to make money these days as we’re in a highly competitive marketplace that is highly governed. It means tough times ahead, but the agile retailer will be sailing away from the competition.


Reduce your cost to serve

If you think your cost to serve is as lean as it can be, then think again. There is always room for improvement when it comes to driving down your costs, and you need to start with simplifying and streamlining processes. This is where your software plays a significant part. Are you really getting the most out of your software platform? Automation is the key forwards; if you can automate everything that can be automated then you will inevitably drive down your overhead costs.


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