What is the Ofgem energy price cap for gas and electricity bills?

The newly implemented energy price cap is set to lower the typical annual bill paid by direct debit to £1,568 per year. Despite this reduction, which marks the lowest bills in two years, costs remain approximately £400 higher than they were three years ago.

What exactly does this energy price cap entail? Covering 28 million households in England, Wales, and Scotland, the cap is recalibrated every three months by the energy regulator Ofgem. It establishes the maximum price allowable for each unit of energy on a standard tariff for a typical dual-fuel household paying by direct debit.

Starting from July 1st until September 30th, gas prices will be capped at 5.48p per kilowatt hour (kWh), while electricity will be capped at 22.36p per kWh. Notably, this cap does not extend to Northern Ireland, which operates its own energy market where prices are also declining.

So, how much can households expect their bills to decrease? According to Ofgem, starting July 1st, households utilizing a typical amount of energy and paying by direct debit for dual gas and electricity will see their annual bill decrease to £1,568, marking a £122 decrease compared to the previous quarter. Conversely, those paying their bills every three months by cash or cheque will face a typical bill of £1,668 annually.

Determining a “typical household” depends on various factors, including overall energy usage, payment method, property type, energy efficiency, and household size. Ofgem’s cap is based on a household using 11,500 kWh of gas and 2,700 kWh of electricity annually, with a single contract for both gas and electricity paid via direct debit.

As for prepayment customers, starting July 1st, they will pay slightly less than direct debit customers, with a typical bill of £1,522 annually. This marks a change from April when prepayment customers paid the same amount as direct debit customers but were previously charged more.

Despite the overall cap reduction, standing charges remain unchanged. These fixed daily amounts cover the costs of connecting to a supply and stand at 60p a day for electricity and 31p a day for gas, though they vary by region.

As energy prices fluctuate, consumers may consider fixing their energy prices for a set period. While fixed-price deals offer certainty, they may lock consumers into higher prices if energy costs continue to drop. It’s advisable to seek independent advice before making a decision.

For those struggling to pay energy bills, various support schemes are available, including the Warm Home Discount scheme for eligible pensioners and low-income households, and the government’s Fuel Direct Scheme to help repay debts from benefit payments. Most suppliers also offer hardship grants and affordable payment plans.