Octopus launches new tariff which could offer energy lower than price cap

Octopus’s new tariff has the potential to lower energy costs below the energy price cap.

The new tariff launches today for both existing and new customers.

Unlike the standard variable tariff (SVT), which has its prices capped by Ofgem, the Octopus Energy Tracker tariff offers customers gas and electricity prices tied to wholesale costs.

Customers could pay less for their energy each day, depending on the conditions in the energy market.

With summer in sight, wholesale energy prices have seen a slight decrease due to milder weather conditions and reduced demand for gas.

However, it’s important to note that if wholesale prices rise in the future, customers on the Octopus Tracker tariff could end up paying more than those on price-capped tariffs.

Right now, 29 million customers on the SVT pay roughly 30.1p per kilowatt hour (kWh) for electricity and 7.5p per kWh for gas.

But in the last 30 days, thousands of customers already on the Octopus Tracker paid a maximum of 20.7p per kWh for electricity and 4.49p per kWh of gas.

At one point in June, unit prices even dropped to just 8.14p per kWh for electricity and 3.54p per kWh for gas.

People can then sign up to the Tracker Tariff when their online account is set up.

They will also need to have a smart meter to be eligible for the Octopus Tracker tariff.

Natalie Mathie, energy expert at Uswitch.com said: “While this might be a good deal at the moment, as wholesale prices are lower than they have been, it is important to note that these prices can go up as well as down and will change day to day.

“If prices do go up, then bills will rise too — and the maximum limit for this tariff is allowed to be much higher than the energy price cap.

“Thankfully this tracker does not have exit fees, so customers can leave at any time without a financial penalty, although it can take a few weeks to switch to a new tariff.”