Image source, Getty Images
- Author, Kevin Peachey
- Role, Cost of living correspondent
A drop in domestic gas and electricity prices has now had an effect, but costs are expected to rise again in October.
Ofgem’s new price cap for England, Wales and Scotland came into effect on Monday, meaning the average household’s energy bill will drop by £122 a year.
That brings the bill for a household using normal amounts of gas and electricity down to £1,568 a year, the lowest in two years.
But meteorologists expect temperatures to rise again ahead of winter, more than reversing the latest decline.
Leading consultancy Cornwall Insight predicts that the average household’s annual bill will rise again to £1,723 in October, an increase of £155, or 10%.
“The modest falls in the summer are expected to be offset by bigger increases in the autumn, when people need to turn their heating back on,” said Adam Scorer, chief executive of the charity National Energy Action.
“The cost of energy is still an unaffordable luxury that many of the poorest simply cannot afford.”
Although the price cap changes every three months, Ofgem illustrates this in terms of an annual bill for a household using a typical amount of gas and electricity.
People in larger homes generally pay more due to higher energy consumption, while people in smaller homes pay less.
This is because the cap, set by Ofgem, limits the maximum price that can be charged for each unit of gas and electricity, not the total bill.
It will affect the gas and electricity bills of 28 million households, but not customers in Northern Ireland, where the sector is regulated differently but where prices are also falling.
Energy bills are significantly lower than the peak after the Russian invasion of Ukraine, when the government intervened to limit energy bill increases.
This has translated into a decline in the overall rate of price increases, also known as inflation.
However, the average household’s energy bill is still around £400 higher than it was three years ago, and there has been much debate on the issue during the election campaign.
In addition, households have built up a collective debt of around £3 billion to suppliers, mainly due to the pressure of high prices.
People with a prepaid meter, who often top up the meter in the colder, darker months and therefore often experience more financial pressure, will be less directly affected by a price drop in the summer.
The vast majority of households pay by direct debit and their payments are spread over the year. They should have been contacted by their supplier about the latest price changes.
Experts say it’s a good idea to read meters now to ensure bill payers are being charged the correct rate.
Ofgem is currently investigating the way the price cap is calculated. This includes reviewing a large number of responses to a consultation on fixed costs.
Latest changes in detail
The new prices in effect from July to the end of September mean:
- Gas prices are now capped at 5.48 pence per kilowatt hour (kWh) and electricity prices at 22.36 pence per kWh.
- An average household uses 2,700 kWh of electricity and 11,500 kWh of gas annually
- Households with prepayment meters pay slightly less than direct debit households, with a typical bill of £1,522
- People who pay their bills by cash or check every three months pay more, with a typical bill of £1,668
- Fixed charges – a fixed daily amount that covers the cost of connecting to an electricity grid – remain unchanged at 60 cents per day for electricity and 31 cents per day for gas, although they vary by region
How to keep energy consumption (and bills) low
Experts have shared three tips to keep your energy consumption under control during the warmer months:
- If your hot water is too hot to wash your hands in, your setting is too high, so turn the boiler down
- Control drafts, for example by placing a black bag of crumpled paper in an unused chimney, or limit other drafts in the home.
- Limit your shower time to four minutes. The charity WaterAid has put together a playlist of four-minute songs, externally to keep you informed