Millions of homes 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%, impacting the annual bills of households depending on their gas and electricity consumption. On average, households paying via direct debit will witness a drop in their yearly bill from £1,849 to £1,720. Analysts at Cornwall Insight predict a further 1% reduction to £1,698 annually by October. For those with prepayment meters, the average yearly bill is decreasing from £1,803 to £1,672.
Individuals paying upon receipt of the bill will see their yearly charge decrease from £1,969 to £1,855. Despite these reductions, families are still facing higher energy costs compared to previous periods. The price cap had seen increments on three occasions before today, with increases of 10% in October, 1.2% in January, and 6.4% in April.
If you are a direct debit payer, you can utilize our calculator to determine the extent of the reduction in your energy bill today. The Ofgem price cap does not restrict the total amount you pay for energy but sets the maximum charges for gas and electricity unit rates along with standing charges, which are fixed fees for grid connection.
It’s important to note that the actual bill may vary from the main price cap figure, which signifies the average expected payment by billpayers. Ofgem calculates this figure based on estimated energy usage by the average household. The typical home is said to consume 2,700 kWh of electricity and 11,500 kWh of gas annually. Additionally, regional variations in unit rates and different rates for prepayment and bill-paying customers can influence the bill.
The price cap is updated every three months to reflect changing wholesale energy prices, unlike the previous biannual updates. Covering approximately 22 million households on a standard variable rate (SVR) tariff, the Ofgem price cap applies to those not currently locked into a fixed energy deal. This situation may arise due to not renewing a tariff post-expiration or failing to secure a deal after relocating. Contacting your energy provider can help verify the type of tariff you are on.
