BILL BOOST
Energy bills to fall by £122 for millions in July as new Ofgem price cap confirmed – what it means for you
Around 29 million households are affected by the price cap
ENERGY bills are set to fall for millions of households this summer.
The energy regulator Ofgem has confirmed the new price cap, which comes into effect on July 1.
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The cap will fall from the current rate of £1,690 a year to £1,568 - the lowest level in two years.
It means the average household paying by direct debit for dual fuel will see their annual bill drop by £122 - a 7% fall.
But bear in mind the exact amount you pay can be higher or lower depending on your usage, and the cap is reviewed every three months.
Only standards and variable tariffs are affected by the price cap, impacting 29 million households, according to Ofgem.
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Unit rates will fall while standing charges - a fixed daily amount - will stay the same.
It means those with higher usage will benefit more from falling prices.
The energy regulator said the price a supplier can charge for gas will fall from 6.04p per kWh today, to 5.48p from July 1.
The price of electricity will fall from 24.5p per kWh to 22.36p, Ofgem said.
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Standing charges, which cover things like maintaining the network and operational costs, will drop to 31.41p from 31.43p a day for gas and from 60.1p to 60.12p for electricity.
Overall energy bill standing charges will remain at £334.
What is the energy price cap?
The price cap also varies depending on the way you pay.
The £1,568 price cap from July will apply to those who pay by direct debit.
For those on prepayment meter it will be £1,522 and £1,668 for those paying on receipt of bills.
Experts at Cornwall Insight had predicted the energy price cap would drop to £1,574 in July.
The latest price cap comes as energy prices reach their lowest level since Russia’s invasion of Ukraine in February 2022.
The war caused a spike in an already turbulent wholesale energy market, driving up costs for suppliers and customers.
Before the energy price shock a standard annual bill was £1,084.
The price cap previously fell from £1,928 in the period from January 1 to March 31, to the current £1,690 from April 1 after a mild winter and high levels of gas storage in Europe.
Cornwall Insight is predicting a small rise to the cap in October, followed by a fall in January 2025.
It's important to note though that the price cap is not a limit on the overall amount people will pay for their energy.
Instead, it caps the amount that they pay per kilowatt hour, or unit, for gas and electricity.
The figure is calculated based on what Ofgem thinks an average household will use.
This is calculated assuming that a typical household uses 2,900 kWh of electricity and 12,000 kWh of gas across a 12-month period.
Those who use less will pay less, and those who use more will pay more.
Be aware that the exact unit rates and standing charges you pay will vary slightly based on your supplier, where you live and how you pay for your gas and electricity costs.
How do I calculate my energy bill?
BELOW we reveal how you can calculate your own energy bill.
To calculate how much you pay for your energy bill, you must find out your unit rate for gas and electricity and the standing charge for each fuel type.
The unit rate will usually be shown on your bill in p/kWh.The standing charge is a daily charge that is paid 365 days of the year - irrespective of whether or not you use any gas or electricity.
You will then need to note down your own annual energy usage from a previous bill.
Once you have these details, you can work out your gas and electricity costs separately.
Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type - this will give you your usage costs.
You'll then need to multiply each standing charge by 365 and add this figure to the totals for your usage - this will then give you your annual costs.
Divide this figure by 12, and you'll be able to determine how much you should expect to pay each month from April 1.
The energy price cap is adjusted every three months to reflect changes in underlying costs.
If you're on a fixed tariff there will be no change to your bill, as you've locked in the price for a set period.
The regulator is currently reviewing how the price cap is calculated, including standing charges.
Some experts, including Martin Lewis, have argued that the charge unfairly penalises those on lower incomes.
While the price per unit of energy is falling, charities have warned that many are still struggling to pay their bills.
National Energy Action (NEA) says that despite the drop households are still paying around £300 more than they were in October 2021.
Chief executive of NEA, Adam Scorer, said: "Every fall in the price cap is good news. It should make life a little easier for everyone.
"But for our clients, and for millions of households in fuel poverty, there remains a huge gap between current prices and affordable energy bills.
"Whoever wins the next election inherits the responsibility to build fuel poverty out of inefficient homes and build greater protection into the regulation of the energy market."
Yesterday, the Tories pledged to drive down energy bills if they stay in power with a five-point plan.
Energy Secretary Claire Coutinho said the cap will be retained under the Tories and confirmed the cost of energy bill levies will be lower in every year of the next Parliament than they were last year.
Conservatives said their plan to help lower energy bills also includes improving price comparison tools, regulating brokers, and setting new standards for customer service and smart meters.
Energy bills - What now?
COMMENT by Tara Evans, Head of Consumer, at The Sun:
IT'S great news that energy bills will fall from July 1 - but there are a few stingers to watch out for.
The price cap is a limit on the amount that energy firms can charge you, but your bill will vary based on how much energy you use and what tariff you're on.
Those on standard tariffs will never pay more for their energy than the price cap, whereas fixed tariffs are 9% cheaper.
Today's announcement is good - but you need to watch out for two things.
Firstly, standing charges (which are a fixed charge that households pay per unit of energy) are still very high.
This means higher users will see a bigger cut to their bills in July than lower users.
The regulator is looking into this issue - but we still don't know what will happen.
It makes it harder to cut your bills by reducing your usage.
Secondly, experts predict that bills will rise again in October by 12%.
That means you'll be paying more again this winter.
It is possible to fix your bills and pay less - but this is a gamble because if the price cap does end up falling you could pay more overall.
We want to hear your thoughts on energy bills. Please comment below or email us at: [email protected]
What can you do now?
The price cap dictates the price of standard tariffs, so the standard tariff will drop on July 1.
The main alternative tariffs being offered are fixes where you lock in - the price is not affected by the price cap.
Fixed deal offers move up and down based on the current supply that energy firms can get based on the current wholesale rates, but at the moment there are some pretty good ones.
Based on current predictions, the average household will pay 3% less for energy than they do currently by staying on the price cap, according to Martin Lewis.
But there are some fixes on the market that are 9% cheaper than the current cap even now, and with the cap set reduce by 7% in July - it will still be cheaper even then.
For that reason, customers might want to lock in on the cheapest fix.
That way you can lock in now at 9% cheaper and get guaranteed rates for the next year.
But as always, make sure to do some research and use a comparison tool such as MSE or USwitch.
Something to bear in mind though is that most comparison sites just give you the current price cap, while you need to look at the price cap over the next year to get the best view.
Of course, you should only switch to the cheapest fixes though, not all of them are bargains and some of them have hefty exit fees.
BEST FIXED DEALS
Martin Lewis' MSE has revealed several of the cheap deals available right now.
As mentioned, a 9% fix is among the best and it comes from Ecotricity's Green one-year fix.
Bear in mind though, it does have £75 dual-fuel exit fees - plus you'll need a smart meter and must pay by fixed or variable monthly Direct Debit.
Outfox the Market's Fix’d Dual May24 is also a good option according to MSE.
It's 8% less than the current price cap, plus it doesn't have any exit fees.
The deal is available as dual-fuel only and you must manage your account online, but smart meters are not required.
OTHER ALTERNATIVES
If you don’t want to commit to a fixed tariff it's always worth considering a variable tariff.
Kara Gammell, personal finance expert at comparison site Money Supermarket Group, previously told The Sun: "These will almost always be at or below the price cap."
For example, E.ON Next's Pledge variable tariff offers a fixed discount of around three per cent on the price cap rates for 12 months.
It will save the average household around £50 a year but comes with a £50 exit fee if you switch before the year ends.
The deal is available to both new and existing customers.
For a bigger reward but at a higher risk, Octopus Energy offers two variable tariffs which track wholesale gas and electricity costs.
Customers on the Octopus Tracker see their prices change daily, but unit rates have remained consistently lower than the price cap in recent months.
The Agile Octopus tariff works similarly to the Octopus Tracker, the main difference is the former’s prices change every half hour.
Remember that those wishing to switch to any of these tracker tariffs must have a smart meter.
Below we've listed some handy ways you can cut your energy costs.
When does the price cap change?
OFGEM reviews the cap on unit rates for those on the default tariff every three months.
This means the energy price cap can move up or down at four different points in the year.
Price cap rates are updated on the following dates:
- January 1
- April 1
- July 1
- October 1
What energy bill help is available?
There are a number of different ways to get help paying your energy bills if you're struggling to get by.
If you fall into debt, you can always approach your supplier to see if they can put you on a repayment plan before putting you on a prepayment meter.
This involves paying off what you owe in instalments over a set period.
If your supplier offers you a repayment plan you don't think you can afford, speak to them again to see if you can negotiate a better deal.
Several energy firms have grant schemes available to customers struggling to cover their bills.
But eligibility criteria varies depending on the supplier and the amount you can get depends on your financial circumstances.
For example, British Gas or Scottish Gas customers struggling to pay their energy bills can get grants worth up to £1,500.
British Gas also offers help via its British Gas Energy Trust and Individuals Family Fund.
You don't need to be a British Gas customer to apply for the second fund.
EDF, E.ON, Octopus Energy and Scottish Power all offer grants to struggling customers too.
Thousands of vulnerable households are missing out on extra help and protections by not signing up to the Priority Services Register (PSR).
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The service helps support vulnerable households, such as those who are elderly or ill, and some of the perks include being given advance warning of blackouts, free gas safety checks and extra support if you're struggling.
Get in touch with your energy firm to see if you can apply.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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