One in three Scots are blaming the energy price cap set by regulators for keeping household bills too high by preventing suppliers from giving cheaper deals.

The survey forms part of a new study from energy experts which has warned that the Ofgem-set price cap has failed to bring about meaningful competition, as suppliers have no incentive to offer better prices to anyone - keeping bills high.

It has led to calls for a reform of the price cap system to offer proper protection for households.

Uswitch, the price comparison and switching company founded in 2000, said action was needed by both government and Ofgem over the system to bring energy bills down.

Ofgem is expected to announce a drop in the energy price cap next Friday, ahead of the change being implemented in October, meaning consumer bills will fall for the second time this year.

According to Cornwall Insight analysts, the new cap for a typical household using gas and electricity in Great Britain is expected to fall from £2,074 currently to £1,871 on October 1. But that is 80% more than the level two years ago.

Concerns have repeatedly been raised over the price cap in recent weeks, as it has allowed the likes of Scottish Gas owner British Gas to secure profits by hiking bills early this year.

British Gas reported its highest ever first-half profits, of almost £1bn, after the energy watchdog let it claw back more money from household bills.

The UK’s biggest energy supplier reported profits of £969m for the first six months of 2023, up almost 900% from £98m in the same period last year.

The profit boom was largely thanks to a tweak to the regulator Ofgem’s energy price cap that allowed the supplier to recoup some of the costs of supplying its 10 million customers during the energy crisis.

The Herald: The scheme will help residents with their energy bills.

The price cap has now taken the place of the UK government's energy price guarantee, a temporary additional measure brought in by government to protect consumers from significant increases in wholesale gas prices.

According to new Uswitch analysis some 54% of Scottish customers “aren’t sure what the cap is or what it does” and 63% don't know that the tariff changes every three months.

Nearly half of Scottish consumers (47%) wrongly believe that the price cap is the maximum amount you can pay for your yearly energy bill.

But it also found that nearly a third of households in Scotland believe the price cap is responsible for suppliers not offering cheap fixed deals.

And a quarter of Scots blame the cap for not enabling them to switch to another provider.

Respondents were asked ‘Do you understand the following statements about the energy price cap to be true or false?’ And 32% replied 'true' when told 'the energy price cap has kept household energy bills high by stopping suppliers from offering competitive deals’.

And 26% replied ‘true’ when told 'the energy price cap means I can’t find a better deal with another supplier.’

Ahead of next week’s price cap announcement, Uswitch called for a reform of the price cap to bring energy bills come down.

Richard Neudegg, director of regulation at Uswitch said: “The majority of energy customers are on tariffs that follow the price cap. The two thirds who don’t realise that their prices may change every three months will be in for a shock now that the Energy Price Guarantee is no longer in place.

The Herald:

“Next week, Ofgem will announce the new price cap from October 1, which will dictate the cost of gas and electricity for the start of the winter – the time of year when we start turning the heating on.

“Unfortunately the price cap alongside other Ofgem rules currently in place have failed to bring about meaningful competition, as suppliers have no incentive to offer better prices to anyone.

“Energy retailers are barred from offering cheaper tariffs specifically to win new customers due to the regulator's ban on acquisition-only tariffs (BATs), and when suppliers have no incentive to attract new customers - or fear of losing current ones - consumers lose out.

“The price cap system needs reforming in a way that offers protection for households and puts real pressure on suppliers to do better for consumers, both in cheaper rates and customer service.”

A spokesman for the Department for Energy Security and Net Zero said: “The government will always ensure that the energy market is working for consumers to protect them from sky high bills and that households are getting the best deal.

“Our consultation on how best to ensure people can access the full benefits of moving to a smarter, more flexible energy system is ongoing.”

Ofgem was approached for comment.

Having been introduced in 2019, the cap was supposed to provide a ceiling on how much energy suppliers can charge homes for energy.

This is done by placing a limit on the amount that can be charged per unit of gas and electricity, which currently sits at 8p and 30p per kilowatt-hour respectively.

How much the average typically consuming household would then pay on an annual basis is the figure displayed in Ofgem’s price cap.

For the quarter from July to October, this was set at £2,074. However households can end up paying more or less than the average depending on how much they use.

Ofgem said the future of the price cap was a matter for ministers to decide.