Ofgem has slashed the price cap on energy bills to £1,923 after wholesale energy prices fell further, it announced on Friday.
The energy regulator said it was cutting the price that a supplier could charge for gas from 6.9p per kilowatt hour (kWh) today to 6.89p from October 1. The price of electricity will fall from 30.1p per kWh to 27.35p, Ofgem said.
This means that the average household bill will end up at around £1,923 per year, according to the regulator’s calculations. Customers on prepayment meters will pay £1,949 on average.
The energy #PriceCap will change on 1 Oct 2023
— Ofgem (@ofgem) August 25, 2023
If you pay by direct debit it's £1,923 - pre-pay is £1,949
It's based on typical use of an average home on a supplier’s standard default tariff
It's a cap on energy unit price, not a cap on total bills
➡ https://t.co/E7kjQqdAUu pic.twitter.com/1lclX8TqRf
Because the cap decides the per unit charge, households that use more will pay more.
This is based on an estimate that the average household uses 2,900 kWh of electricity and 12,000 kWh of gas.
Last week experts at Cornwall Insight, an energy consultancy, expected gas to fall to 6.9p and electricity to just under 27p.
Ofgem chief executive Jonathan Brearley said: “It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter.”
The problem is the Tories have learnt no lessons from this crisis
The drop in the cap appears at first glance to be good news for millions of households. Last winter the cap was de facto superseded by the Government’s Energy Price Guarantee which kept the average household’s bill at £2,500.
But on top of that the Government was also paying around £66 per month towards each household’s energy bill. This support is not there this winter, meaning that many households will be paying more every month this winter than they were last winter.
Mr Brearley said that now that energy prices were easing, Ofgem had allowed suppliers to earn a little more money off their customers.
“This means there should be no excuses for suppliers not to be doing all they can to support their customers this winter, and to reinforce this we’ll be introducing a consumer code of conduct which we will look to have in place by winter,” he said.
From 1 OCT 2023 Price Cap average direct debit unit rates for energy;
— Ofgem (@ofgem) August 25, 2023
ELECTRICITY
Unit rate: 27.35p per kWh
Standing charge: 53.37p per day
GAS
Unit rate: 7p per kWh
Standing charge: 30p per day
These are caps on unit rates (not a cap on total bills) and vary by region
Mr Brearley is one of many to question the effectiveness of the price cap and point towards the benefits of a so-called social tariff, which would offer cheaper gas and electricity to those most in need.
Without that, experts expect that average energy bills will remain at around £2,000 for vulnerable households for years to come.
Labour’s shadow energy and net zero secretary Ed Miliband said: “Higher energy bills are unfortunately here to stay under the Conservatives – even with this fall, bills are significantly higher than they were only three years ago.
“The problem is the Tories have learnt no lessons from this crisis. They continue to side with the oil and gas companies making record profits over hardworking British families, with their refusal to fix the gaping loopholes in the windfall tax or make the sprint we need for clean power, keeping the onshore wind ban and failing to insulate homes.”
David Cheadle, chief operating officer at the Money Advice Trust, the charity behind National Debtline, said: “This is an extremely worrying time for people who have fallen behind on their energy bills, whilst grappling with high costs across the board.
“Looking ahead to winter, many households will face impossible choices without further support.”
