Energy price cap change means lower bills, but relief may be temporary

Domestic gas and electricity prices have now fallen, 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.

This brings the bill for a household using an average amount of gas and electricity down to £1,568 a year, the lowest amount in two years.

But meteorologists expect temperatures to rise again in the run-up to winter, more than offsetting the latest drop.

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 remains an unaffordable luxury that many of the poorest people simply cannot afford.”

Although the price cap is adjusted every three months, Ofgem represents this using 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, restricts 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 prices are also falling.

Energy bills are significantly lower than the peak after the Russian invasion of Ukraine, when the government intervened to limit price increases.

This has led to a decrease in the general price increase, 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 as a result of high price pressures.

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.

According to experts, it is a good idea to read your meters now to ensure you are paying the correct rate.

Ofgem is currently investigating the way in which the price cap is calculated, including reviewing a large number of responses to a consultation on fixed costs.

The new prices that apply for the period July to September mean the following:

• Gas prices are now capped at 5.48p per kilowatt hour (kWh) and electricity prices at 22.36p per kWh
• An average household uses 2,700 kWh of electricity per year and 11,500 kWh of gas
• Households with a prepaid meter pay slightly less than those with a direct debit, with a typical bill of £1,522
• People who pay their bills every three months in cash or by cheque pay more, with a typical bill of £1,668
• Fixed charges – a fixed daily rate that covers the cost of connecting to a supply – are unchanged at 60p per day for electricity and 31p per day for gas, although they vary by region

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, then your setting is too high, so turn the boiler down
• Control draughts, for example by placing a black bag of crumpled paper in an unused chimney, or limit other draughts in the home.
• Limit your shower time to four minutes. The charity WaterAid has compiled a list a playlist of four minute songsto keep you on time

Read more here if you are having trouble paying your energy bill