A reduced energy price cap has been announced, although the relief could be short-lived for homeowners
The energy price cap has fallen by £122, Ofgem has today announced(Image credit: Getty Images)
Energy price rises have begun to ease as Ofgem has announced today the energy price cap has fallen by £122.
This adjustment reduces typical energy bills from £1,928 to £1,568, effective until September 30, impacting approximately 23 million households.
Here's your essential guide, along with practical energy-saving tips to manage these changes effectively.
What has caused the reduction in the price cap?
The decline in the energy price cap is due to declining wholesale gas and electricity prices since the cap was last set in February.
In a meeting with the House of Commons Energy Security and Net Zero Committee last week Jonathan Brearley, CEO of Ofgem, stated: “What we are seeing is the markets have stabilised, prices have come down, and we are hopeful we will see positive news around the price cap on Friday.”
The energy bills of around 23 million households in England, Wales and Scotland are currently governed by the energy price cap, which is set by Ofgem, after the government's Energy Price Guarantee, capping energy at £2,500, ended in July 2023.
The Ofgem price cap means the government subsides energy costs to combat the rise in energy prices(Image credit: Getty Images)
How much will I now pay for my energy bills?
Live in Northern Ireland?
There are just two energy suppliers in Northern Ireland (SSE and Firmus Energy), which has its own regulatory system. The government says it will reveal details for Northern Ireland legislation on the energy price guarantee in due course.
With the energy price cap set at £1,568 until October electricity will be capped at 22.36 pence per kWh and gas will be capped at 5.48 pence per kWh. This amount however does still vary depending on region.
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Households using LPG and heating oil have also begun to receive discretionary payments to help them manage their bills.
Homeowners warned standing charges will remain the same and costs could rise in winter
Despite the anticipated decrease in the price cap, homeowners are cautioned that standing charges will remain unchanged, potentially leading to higher bills when the cap is reviewed again in October.
A standing charge is a fixed daily fee added to most gas and electricity bills, covering the cost of supplying energy to your property, regardless of actual usage. On April 1, this charge was increased to £334 annually.
Despite Ofgem's consultation to reduce this amount, Jonathan Brearley confirmed it would stay the same. He warned that this decision could adversely affect approximately 1.2 million vulnerable consumers, potentially leaving them £100 worse off.
Meanwhile, a report from the Energy & Climate Intelligence Unit (ECIU) released on Monday suggests that consumers could face an additional financial burden of up to £600 this winter, largely due to higher wholesale energy prices.
Analysts project a possible £200 increase in the energy price cap starting from October, with expectations that this level could persist until June. Additionally, Cornwall Insight's recent forecast indicates a potential 10% rise, amounting to approximately £155 annually, amidst considerable uncertainties in the energy market's future trajectory.
Despite the price cap falling standing charges for homeowners will remain at the same level(Image credit: Getty Images)
What additional government support is available?
A universal joint priority services register has been put forward by Ofgem aiming to simplify and streamline assistance for vulnerable households receiving specific means-tested benefits.
The joint priority services register is a free and voluntary system that your supplier uses to ensure the correct support is given to its most vulnerable customers.
Although, customers currently in need of help with heating oil costs must individually register with each utility company. The joint priority services register would combine the existing databases of energy firms and other utility services, including water suppliers, to make it easier for customers to find which provider offers them the right support.
Only customers deemed vulnerable qualify for means-tested benefits with vulnerability being determined by various factors, such as age, illness, disability, or the presence of young dependents in their household.
Households who are deemed vulnerable qualify for means-tested benefits and receive the additional cost of living payments next year worth £900. Pensioner households will receive an extra £300, while people on disability benefits will get payments worth £150.
The government also launched an energy MOT service to help households establish how to make energy-saving improvements to their homes.
How you can lower your energy bills
Improvement Grants
There are initiatives in place to provide homeowners with financial assistance in making energy efficiency improvements, including insulation grants
We've put together a comprehensive list of energy saving tips to help you navigate the energy crisis and lower your heating bills.
Included are some quick fixes you can do in the short-term, such as swapping to LED light bulbs, and higher-value improvements which come from making long-term investments in your energy efficiency, such as making sure your home has efficient insulation. A study earlier this year revealed that households saved £200 per year over 10 years having had new insulation installed.
The Energy Efficiency Infrastructure Group has called on the government to prioritise energy saving through home improvements, such as better insulation, which it says could save UK households more than £500 a year on energy bills.
Citizens Advice can also help if you are struggling to afford your fuel, and will take you through the steps you can take to sort this with your supplier.
What happens if my supplier goes bust?
Around two million households have seen their supplier cease trading since last summer, with around 40 energy suppliers ceasing trading since the beginning of 2021.
Bulb Energy, with 1.7 million customers, is one of the most high-profile firms to be affected, which was placed in Special Administration in December 2021.
If your supplier fails, Ofgem will make sure affected households continue to be supplied, and will not lose money owed to them. Your new energy supplier would then be responsible for taking on any credit balances you may have.
You can learn more about what to do if your supplier stops trading from the Citizens Advice Bureau.
News Editor Joseph has previously written for Today’s Media and Chambers & Partners, focusing on news for conveyancers and industry professionals. Joseph has just started his own self build project, building his own home on his family’s farm with planning permission for a timber frame, three-bedroom house in a one-acre field. The foundation work has already begun and he hopes to have the home built in the next year. Prior to this he renovated his family's home as well as doing several DIY projects, including installing a shower, building sheds, and livestock fences and shelters for the farm’s animals. Outside of homebuilding, Joseph loves rugby and has written for Rugby World, the world’s largest rugby magazine.
