Does the Energy Price Cap Affect Smart Time-of-Use Tariffs?

The energy price cap is set by Ofgem. It controls the highest amount energy suppliers can charge for standard variable tariffs, or SVTs. This cap works differently for smart time-of-use tariffs. Time-of-use tariffs let homes pay different rates based on the time of day. They usually provide cheaper electricity during off-peak hours and cost more during peak times.

The price cap helps protect customers from paying too much for standard tariffs. But it doesn’t affect dynamic pricing energy tariffs or smart time-of-use energy plans. This means that people on standard variable tariffs (SVT) are safe from some high costs. However, households using time-of-use (ToU) tariffs may see higher prices during peak hours. They can also save money with lower rates during off-peak times.

How the Energy Price Cap Affects Smart Time-of-Use Tariffs

Key Differences: Price Cap vs Time-of-Use Tariffs

• The energy price cap only applies to standard variable tariffs.
• Time-of-use tariffs do not follow this cap as they change with market prices.
• Consumers can lower their electricity bills by using energy during off-peak times when smart time-of-use tariffs are available.
• Peak times, usually between 4 PM and 9 PM, have higher electricity prices because of the large demand on the grid.
• Off-peak times, like midnight to 7 AM, have lower prices. This is good for EV owners, storage heaters, and smart home users.

Latest Energy Price Cap Figures (January – March 2025)

The energy price cap is now £1,949 a year for a typical household. This applies to people who use 2,700 kWh of electricity and 11,500 kWh of gas per year. This cap has increased by 6.4% from the last amount of £1,738, which was set for January to March 2025. (Source: Ofgem)

1. Electricity Rates (Standard Variable Tariffs – April to June 2025)
   • Unit rate: 27.03p for each kWh
   • Standing charge: 53.80p each day
2. Gas Rates (Standard Variable Tariffs – April to June 2025)
   • Unit rate: 6.99p for each kWh
   • Standing charge: 32.67p each day
3. The prices for SVT are secure thanks to the price cap.
4. Time-of-use tariffs do not have this security, so prices can rise or fall based on how much people want it.

These updated figures reflect Ofgem’s announcement on February 25, 2025, and will apply from April 1 to June 30, 2025.

Electricity Costs Under Different Tariffs (April – June 2025)

As of Ofgem’s announcement on February 25, 2025, the energy price cap will increase by 6.4% for the period from April 1 to June 30, 2025. This adjustment affects various electricity tariffs. Below is the corrected breakdown of electricity costs under different tariffs for the period of April to June 2025:

• Time-of-use tariffs provide cheaper electricity during off-peak hours.
• SVTs come with a fixed rate. This helps you budget, but you cannot change the price.
• EV owners and homes with smart meters can save money during off-peak times with time-of-use tariffs.

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Peak vs Off-Peak Electricity Rates Under the Energy Price Cap

• Peak hours usually go from 4 PM to 9 PM. Prices are higher because more people need energy during this time.
• Off-peak hours are from midnight to 7 AM. Prices are lower here, which can help you save on your energy bills.
• Shoulder hours are between 9 AM and 4 PM. Prices during this time are moderate, making it easier to plan your electricity usage.

• Households with time-of-use plans can save over 50% on kWh during off-peak times.
• Smart meters allow you to see energy consumption in real time, helping you plan for cheaper electricity.
• Energy suppliers such as Octopus Energy and British Gas offer flexible pricing based on market conditions.

How Smart Meters Affect Time-of-Use Tariffs

A smart meter is helpful for watching energy use. It can change electricity use on its own based on real-time pricing.

Benefits of Smart Meters for Time-of-Use Tariffs

• You can read your meter automatically. This means you will no longer get estimated bills.
• It allows you to use energy prices that change. You can track these prices in real-time.
• You can change when you use electricity to save money by using it during times with lower prices.
• It also works with smart home devices. This helps you save money automatically.

Who Benefits Most from Smart Time-of-Use Tariffs?

• EV owners can save money by charging at night when rates are lower.
• Storage heater users can save on energy costs by using heat when demand is low.
• Households with solar panels can store extra energy during the day to use at night.
• Smart home users can program their dishwashers, washing machines, and other appliances to run when rates are the lowest.

How Time-of-Use Tariffs Work with Renewable Energy

The increasing use of renewable energy sources, like wind and solar power, is changing how time-of-use tariffs work. The UK electricity grid uses several energy sources. It combines fossil fuels, nuclear power, and renewable sources to create electricity. However, wind and solar power don’t always produce energy at the same level. Sometimes, there is more renewable electricity available. This leads to cheaper electricity prices at those times.

Many energy companies now offer dynamic pricing plans for energy. These plans adjust based on the amount of renewable energy available. When there is a higher supply of solar or wind power on the grid, homes that use smart time-of-use plans can save money on their energy bills.

• Octopus Energy has a tariff called Agile. It changes prices every thirty minutes. This helps customers charge their EVs or run appliances when electricity is cheaper.
• British Gas and E.ON Next offer tariffs that adjust prices based on the grid’s energy needs and the amount of renewable energy available.
• People with solar panels can rely less on the grid. They can use battery storage systems to save low-cost electricity for later.

As the UK works towards its goal of net-zero carbon, changes in the Ofgem price cap may result in more flexible energy pricing. This can help customers who use electricity when renewable energy generation is high.

How Demand Flexibility Services Impact Smart Tariffs

Demand flexibility services (DFS) are programs the government supports. They reward homes that lower energy use during peak hours. The National Grid ESO set up the Demand Flexibility Service. This program helps prevent blackouts and reduces the need for gas power stations when demand is high.

Customers with smart meters can join DFS trials. By participating, they can receive payments or discounts for using less energy during peak times. Energy suppliers such as Octopus Energy, British Gas, and EDF offer DFS rewards in their time-of-use plans. This means customers can save even more money.

How customers can join demand flexibility programs:

To join demand flexibility programs, follow these steps:

• Check with your energy provider to see if they offer such programs.
• Learn about the rules and requirements to take part.
• Sign up online or contact customer service to apply.
• Make sure to read the details about how the program works.
• Start changing your energy use based on the program’s guidance.

Get started and enjoy the benefits today!

• Use a washing machine, dishwasher, or tumble dryer when energy demand is low.
• Charge an electric vehicle during times when demand is less.
• Preheat your home with electric storage heaters before peak hours.
• Reduce electricity use during busy times on the grid to earn discounts.

The National Grid states that customers who join DFS programs can save up to £100 every winter. They achieve this by adjusting their energy consumption to not use energy during weekday evenings.

Smart meters and time-of-use electricity rates help people reduce their carbon footprint. They can also help lower electricity bills.

Best Energy Suppliers for Time-of-Use Tariffs in 2025

Not all energy suppliers offer smart time-of-use energy plans. Still, some providers have low rates for off-peak electricity. They also offer flexible pricing. Here are some leading time-of-use electricity tariffs available in 2025:

Why these tariffs stand out?

• Octopus Energy Agile changes every 30 minutes. It rewards you when you adjust your energy consumption.
• British Gas PeakSave offers extra savings for using less energy during busy times on the grid.
• EDF and E.ON Next provide low rates at night. This is good for EV owners and homes with electric storage heaters.
• You need smart meters for all time-of-use tariffs. They help keep track of real-time electricity use.

Switching to a time-of-use tariff can help lower electricity bills. This plan lets you use cheaper electricity when demand is not high, during off-peak times. Households can save money if they charge their electric vehicles (EVs), run appliances at night, or use renewable energy sources. This can lead to significant savings compared to standard variable tariffs.

Future of Time-of-Use Tariffs Under the Price Cap

• Energy suppliers might introduce flexible plans. These plans will have real-time prices based on the demand on the grid.
• Renewable energy sources, like wind and solar, can help reduce peak-time prices. They achieve this by adding extra power to the grid.
• Smart home batteries could let homes store cheaper electricity. This would be during times when demand is low.
• Dynamic pricing energy plans are expected to become more popular. They will provide lower rates during times of low demand.

The energy price cap will continue to help people who have standard tariffs. Time-of-use tariffs will be updated. This change will offer more choices to users, but it will require smart meters.

FAQs About the Energy Price Cap & Smart Time-of-Use Tariffs

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