To worry that people think the price cap means unlimited energy

[Shortjanet]

I've read quite a few comments here where posters seem to think fixed or capped energy prices mean that you can pay a set or limited amount for unlimited energy. It's quite worrying to think how much debt people might run up. The way the headlines are describing it as "bills capped to £x" or similar is helping to fuel the misunderstanding (no pun intended) I think. AIBU to wish the media were being clearer that caps and fixes apply to each kWh used and standing charges, not the total you can pay.

Yep. A great example of the media/ politicians, trying to make something easier for the public to engage with but actually creating a huge amount of confusion and worrying misconceptions.

Yes I think the language around the caps is really unhelpful and will lead people with less understanding of the subject into trouble

I've even seen some saying things like if the caps are going to mean paying double they'll make sure they get their money's worth by having the heating on all the time. Totally understandable how the language around it has created confusion but the consequences could be horrendous. There needs to be clearer explanation as to what the figures mean.

I've thought exactly the same. The articles may explain it properly, but there are too many headlines which say the energy cap is the £3,549, and now Liz Truss is apparently going for £2,500, but the headlines are just as misleading. And all the news outlets are guilty of doing it, so there's nothing that's eye catching to contradict them.

Explain to me like I’m 5 please
what does the price cap mean in real terms

The media have a lot to answer for.
They should be reporting it as price capped per KWh
I’ve seen people on here think they can use as much as they like for the money because the media keep banging on about the average total annual cost.

The price is capped per unit. So you can still run up a huge bill if you use a lot of units of electricity.

Too many people don't actually understand why the price is going up though do they? There's a Facebook post doing the rounds suggesting it's purely for the people at the top to get more bonuses 🤷🏻‍♀️ it makes me want to scream as they just don't educate themselves about world problems they just read crap on Facebook. So yea so many they'll just think a fixed fee will mean use whatever you want and only pay a set amount 🤯 x

The price which is capped is the amount you can be charged per unit energy (kWh) you use, and the standing charge. There will still be a big variation in what people pay dependant upon how much gas and electric they use. The figures in the headlines are the amount the AVERAGE household will use. This is the bit that isn't really made clear I don't think. If you use more you'll still pay more.

I think it means the cap is on the price the suppliers can charge for both the standing charge and each kwh of energy used. So the cap on this prices will go up, but not as much as they would if the policy to cap at £2500 wasn't brought in. I think if a typical household would usually pay £1200 a year the same energy would cost £2500 a year, due to higher standing charge and cost per kWh used. So to bring bills down you would need to use less, though standing charge is something you can't do anything about. So usage is the only way to bring bills down

Sorry, that should read what the average household will pay annually.

@Coconutmeg Its the cost per KWh that’s been capped. The more energy you use the higher your total will be.
Imagine it were apples, and the cost per apple was capped at £1 each and no higher, and the average family used 50 apples a year. The cost for them is £50.
If you decide to eat as many apples as you can and end up eating 200. The price is capped at £1 per apple, your bill £200 because you’ve eaten more.

@Coconutmeg the pricecap gives a maximum price per kWh that can be charged. These are the 52pence for 1 kWh of electricity, with a 46p per day standing charge. For gas it's 15p per kWh with a 29p daily charge. You pay per unit use.
They then calculate what that means for an average household. That's where the £3500 /£2500 numbers are coming from. They are taking a typical user, and using the numbers per kWh to get an annual price.
BUT if you use less energy you pay less. If you own a mansion kept at 25C and heat a swimming pool, you will pay more (much more)than the price cap shouted about, but not pay more than the individual unit price.

It's shocking how many people don't seem to realise what they are agreeing to and how their energy bill works. Truly shocking.

They should be reporting it as price capped per KWh

Not sure that will help. If people are unable to understand 'The price cap is £X for typical use' and not think to look at their own circumstances and how they might compare to an average or go off and read up about it, they're not going to understand 'A pence per unit for electricity plus B pence per day standing charge plus C pence per unit for gas plus D pence per day standing charge' so if you want to know how much it will cost each month all you have do is solve the equation

(XA + 365B + YC + 365D)/12 where X is the number of electric units you use each year and Y is the number of gas units you use.

There was someone on a thread earlier claiming that people were unable to multiply or divide by 4 to work out which bottle of milk was best value, so I'm not sure quoting kWh rates is going to help anyone who hasn't done the bit of reading behind what the price cap figure actually means. It's not a secret, Martin Lewis must have said it a million times on TV and radio in the last few months.

Anyone who is on the "Energy support and advice" Facebook group can clearly see how financially illiterate 90% of the people on there are. It's terrifying that people have so little grasp on financial knowledge

Should people not inform themselves?

There was someone on a thread earlier claiming that people were unable to multiply or divide by 4 to work out which bottle of milk was best value you don't even have to do that these days, they write the price per unit on the labels in the supermarket

They should if they can. There will be many who can't though. That's what worries me, that these customers who don't understand aren't having it explained clearly enough by the energy providers so how are they being allowed to sign up for something they really don't understand.

We should be teaching financial literacy in schools. It’s a life skill.

@LionessesRules thanks. It’s the talk of the thousands of £££ that do make it confusing

@Sooverthisnow That's a really good post/explanation - have you considered a career in government comms?

The price cap applies to every unit of energy (gas or electricity) that you use. The headlines saying energy prices are capped at £3,549 are factually wrong but you have to read deeper into the articles to find that out. The £3,549 (or £2,500 if Liz Truss does what she says she's going to do) related to an average household, using an average amount of energy.

But if you use more than the average amount, you will pay more than £3,549/£2,500. And by the same token, if you use less than average, you'll pay less than that. The caps from October will be 52p per unit of electricity (ie one kilowatt hour) and 15p for gas, ditto. Everyone's bills will be a lot higher than they're used to, regardless of how much they use, because the unit price cap has gone up by 80%. Your bills from October will be the above unit charges multiplied by the number of units you use.

This is a cracking example of what the OP means:

The new energy price cap will be £3,549 per year, which is an increase of £1,578 compared to the previous cap.
(from www.theecoexperts.co.uk/blog/october-energy-price-cap-rise#:~:text=22%20million%20households%20are%20set%20to%20see%20their,price%20of%20gas%20will%20be%2015p%20per%20kWh.)

That is just so misleading as to be criminal IMHO.

Someone posted the same worry a few days ago www.mumsnet.com/talk/am_i_being_unreasonable/4624109-to-be-worried-about-the-number-of-people-who-think-a-fixed-energy-tariff-means-the-monthly-price-will-always-be-the-same-regardless-of-usage?page=1

I think there were some good explanations on there about what the cap actually is.

Ah, but the writing is too small for many people to read. We're all ableist as well as overestimating people's basic arithmetic abilities, you see.