Millions of households are set to experience a decrease in their energy bills starting today with the implementation of the new Ofgem price cap. The price cap has been reduced by 7%, but the actual amount you pay will still be determined by your gas and electricity consumption. On average, households paying through direct debit will witness an annual bill decrease from £1,849 to £1,720.
Energy consultancy firm Cornwall Insight predicts a further 1% drop to £1,698 per year by October. For those with prepayment meters, the average yearly bill will decrease from £1,803 to £1,672. Customers who pay upon receiving the bill will see a decrease from £1,969 to £1,855 annually. Despite these reductions, families are still facing higher energy costs compared to previous years.
The price cap had seen three increases before today, rising by 10% in October, followed by 1.2% in January, and a further 6.4% in April. If you are a direct debit customer, you can use our calculator to determine the extent of the reduction in your energy bill.
It is important to note that the Ofgem price cap does not set a limit on the total cost you might pay for energy but rather specifies the maximum charges for gas and electricity unit rates along with standing charges. These standing charges are fixed fees for grid connections.
Your actual bill may vary from the main price cap figure, which serves as an average bill estimate. Ofgem calculates this figure based on the average energy consumption of a household. Factors such as location and customer type (prepayment or bill receipt payment) can influence your final bill amount.
Additionally, the price cap is adjusted every three months to reflect fluctuations in wholesale energy prices, compared to the previous biannual updates. The price cap applies to approximately 22 million households on standard variable rate (SVR) tariffs, especially those not locked into a fixed energy deal.
If you are unsure about your tariff status, contact your current energy provider to clarify whether you are on a standard variable rate tariff due to not transitioning to a new deal after your previous one expired or after relocating.