What is the Ofgem energy price cap for gas and electricity bills?
Gas and electricity bills are set to decrease by an average of 7% in England, Scotland, and Wales starting on 1 July. The new energy price cap will reduce the typical annual bill for direct debit payments to £1,568. Despite this being the lowest level in two years, bills remain approximately £400 higher than three years ago.
The energy price cap, which covers 28 million households in these regions and is regulated by Ofgem, limits the maximum price for each unit of energy on standard tariffs. From 1 July to 30 September, gas prices will be capped at 5.48p per kilowatt hour (kWh) and electricity at 22.36p per kWh. This cap does not apply in Northern Ireland, which operates its own energy market.
For a household using a typical amount of energy and paying by direct debit, the annual bill will decrease by £122 compared to the previous quarter, bringing it to £1,568. Those paying quarterly by cash or cheque will see a typical annual bill of £1,668. The cap is based on a “typical household” usage of 11,500 kWh of gas and 2,700 kWh of electricity annually.
Prepayment customers will pay slightly less than those on direct debit, with a typical annual bill of £1,522 from 1 July. Prepayment meter customers, who number around four million, previously paid more than direct debit customers but have paid the same since April. New regulations require suppliers to offer more opportunities to clear debts before switching customers to prepayment meters, and some households are now exempt from having meters installed.
Standing charges, which cover the cost of connecting to a supply, remain unchanged at 60p per day for electricity and 31p per day for gas, varying by region. Additionally, £28 is being added to annual bills to cover £3.1bn of customer debt owed to suppliers.
As energy prices fall, the potential for cheaper, fixed-price deals has increased. These deals offer price certainty but may be disadvantageous if prices drop further. Cornwall Insight forecasts a rise in the typical bill to £1,762 in October, remaining at that level into January, though such forecasts are subject to change.
For those considering fixed-price deals, Ofgem advises seeking independent advice and weighing the benefits of the lowest price against the security of a fixed rate. Price comparison site Uswitch expects more competition from suppliers but warns customers to check for exit fees on fixed deals.
Support for energy bills continues for certain groups, such as pensioners and low-income households, through programs like the Warm Home Discount scheme and the government’s Fuel Direct Scheme. The Household Support Fund, extended by six months in the spring Budget, also helps vulnerable households. Energy suppliers must provide affordable payment plans or repayment holidays to those struggling with bills, and most offer hardship grants. However, the energy support scheme for businesses, which provided discounts on wholesale prices, ended in March.
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