Research conducted on the eve of the price cap rise reveals that awareness of how a price cap works and the impact of the rise on people’s lives is worryingly low.
It is now just over a week since Ofgem raised the energy price cap. In that time, people across the UK will have felt the pinch but for many, the true cost of this rise will still be unknown as they are yet to receive bills with the higher rates.
A third (31%) of Gen Z respondents mistakenly thought the energy price cap is a limit on the maximum bill a household can be charged by their supplier.
Just prior to the price cap rise, we wanted to understand the extent to which people understood the impending change to their bills. Our hypothesis was that awareness would be limited: many people would not understand how the price cap works or how it will impact on them. The reasons for this are many:
• Energy is a low-engagement category meaning it rarely breaks through into our day-to-day thoughts.
• Other events in the news, such as the tragic war in Ukraine, have taken up much of our attention recently.
• The energy market in general, and the price cap in particular, are complex ideas. Even as a researcher who has worked in the sector for many years, I still find myself struggling to wrap my head around some of the more complex aspects of the industry!
Unfortunately our hypothesis was proved right by research conducted on 26th-27th March – awareness of the price cap and the impact of its impending rise were low. This shows yet again that more needs to be done to engage and educate people on the energy sector given the significant impact it has on their day-to-day lives. This need will only become stronger as we move towards Net Zero, adopting new low carbon technologies in our homes and greater levels of digitisation in the sector.
When asked what they thought the price cap was, only half (53%) successfully identified it was a cap on the price per unit a supplier can charge, rather than a cap on the total bill. This was lowest for Gen Z respondents (47%), who were more likely to say it was a cap on the total bill than the rest of the population (31%).
We also wanted to understand if people knew the impact on their household before the price cap rise kicked in. Sadly only half (49%) said they were aware of the price cap rise and knew what the impact on their household would be. As shown in the chart below, older audiences were more likely to be aware of the price cap and its impact on their household. Whilst it was a major news story, this shows that suppliers, the regulator and consumer advocacy organisations were not fully successful in their mission to convey how the rise would impact individual households.
It is worth noting that one of the audiences most likely to be impacted by the price cap rise, those on variable tariffs, were more likely to believe they knew the impact on their household (67% vs. the average of 49%). However, only half (47%) of those who pre-pay for their energy said they knew what the impact would be on their bill would be. Given this audience tends to include the least financially resilient members of society who already pay higher rates for their energy, this is a worrying statistic.
The challenge of educating people on the energy sector is a big one: it’s seen as complex and boring. Those of us that work in the sector day in day out, however, know the impact it has on people’s lives will only grow as we work towards Net Zero and greater democratisation of energy.
If you would like to discuss this data or how best to engage people on similar topics, please get in touch with [email protected].