Eco Quote Today

Renewable Fuse Energy Tariff Undercuts Price Cap

Electricity pylons in a grassy field against a blue sky
Author: Samuel Beckingham
Updated: Aug 23, 2023
3 minutes read

When it comes to energy companies, they are bound by Ofgem to the maximum they can charge homeowners. If any company undercuts the rates that are set by the energy watchdog, they could potentially face going bust. However, brand new electricity-only supplier, Fuse Energy, is offering energy cheaper than the price cap in order to appeal to mass users.

This is the first time since the start of the energy crisis that a new electricity supplier has entered the market, and it’s relatively groundbreaking. Working solely through its app, new customers are able to sign up to a variable electricity tariff that gives you much more control than you’d find with any other supplier. When moving home, for example, you can take your tariff with you and be signed up in as little as three minutes.

The lower prices offered from Fuse Energy mainly come from their reduced standing charges. This is what you pay simply for the privilege of being connected to the grid, even if you don’t use any energy. In typical household energy use terms, a yearly usage of 2,900kWh a year will be around £1,067 under the current cap. Fuse Energy, however, undercuts this by 5%, which is around £55 less. The standing charges work out £33 a year cheaper than the price cap.

When the new price cap comes into effect on 1st October, Fuse will be 13% cheaper, taking this down to £931 a year.

Low users of electricity have been struggling with standing charges for decades, and Martin Lewis has always campaigned for them to be substantially reduced or eliminated altogether. This current tariff offers potential savings of up to 7% by Ofgem’s own standards of low use. This lower usage is around £741 a year on the price cap, but only £689 a year on Fuse Energy. According to the Money Saving Expert website, this low level works out even cheaper than Utilita’s tariff that doesn’t have a standing charge.

You can see typical energy costs in the table below.

There are, of course, elements to bear in mind with this new tariff. The price cap will change again after September as the current rates will be reviewed. The rates included in the table are also averages and are based on consumers paying by direct debit. However, there are more important points to note.

Firstly, this tariff is only designed for electricity-only users. If you have a gas boiler or cooker, you can still switch to Fuse Energy, but you’ll also need a gas-only tariff from another supplier. That’s two energy companies to deal with. Dual fuel customers can still benefit from these cheaper electricity prices, but they won’t get the most as electricity-only customers will.

Secondly, the tariff is variable. While the prices may look good now, they will fluctuate as they are dictated by the price cap. The good news is that they can’t exceed this cap, so while the prices are currently cheaper, there’s no way they can become more expensive than any other energy supplier.

Thirdly, the direct debits are slightly different to how they work with other energy suppliers. Instead of having an average electricity use taken and paid for throughout the year so costs are roughly the same, Fuse Energy bills you for what you use month by month. This does have the downside of being more expensive during the winter when heating will be at peak use. Variable direct debits are the norm for Fuse Energy as they don’t offer other direct debit payments, credit or prepayment options.

Fourthly, the company is based on its app. If you need to get in touch with the company, there is no phone number to use. This tariff can only be reached, used and cancelled through the app itself. Both Android and Apple users are able to download it. The main benefit of the app system is that you are able to monitor your electricity use and see how much you’re saving as a result.

Finally, the company boasts about its renewable energy generation capabilities, but energy generation and supply are not directly linked. While you will be contributing towards profits that go towards additional renewable electricity generation, you will still be part of the grid that has electricity produced by non-renewable means. Fuse Energy operates 18 megawatts of solar and wind sites across the UK and they specify that an additional 100MW is on the way.

With any new electricity company, there are dangers. Plenty of energy companies have gone bust in the last few years, even before the energy crisis started. Unlike bigger groups that have been tried and tested, it’s unclear how financially stable Fuse Energy actually is. They have received over $78 million of funding to date, but only time will tell if they last.

Are you looking to lower your electricity bills? Why not consider getting solar panels for your property?