Energy price rises appear to finally be falling with the price cap set to reduce prices by another 7% from October.
The announcement by the energy regulator Ofgem will mean typical energy bills will reduce from the current cap level of £2,074 to £1,923 from October when a new cap is set. This rate will remain until December 2023.
"The change will bring the average dual-fuel energy bill below £2,000 a year for the first time since April 2022, saving households an average of £151 on the previous quarter," a spokesperson for Ofgem said.
The change in the price cap affects around 23 million households. Here is everything you need to know as well as someenergy saving tips.
Why are energy price rises finally coming down?
The energy bills of around 23 million households in England, Wales and Scotland are currently governed by theenergy price cap, set Ofgem, after the government'sEnergy Price Guarantee, capping energy at £2,500, ended in July 2023. Without the EPG, consumers would have had to continue to pay the energy price cap, which hit a peak of £4,279 last year.
But while the energy price cap set at £1,923 per year from October, if you use more energy than the average household you might ending paying more than that amount. That's because the price is not a cap on how much households pay for their bills, but rather a metric for average energy prices to be set.
As for why prices are now starting to come back down, an Ofgem spokesperson said: "The drop, the lowest level since October 2021, reflects further falls in wholesale energy prices, as the market stabilises and suppliers return to a healthier financial position after four years of loss making."
"The price cap savings continues the downward trend since prices peaked at £4,279. However, it remains well above the average before the energy crisis took hold in 2021 and the market remains volatile."
How much will I now pay for my energy bills?
There are just two energy suppliers in Northern Ireland (SSE and Firmus Energy), which has its own regulatory system. The government says it will reveal details for Northern Ireland legislation on the energy price guarantee in due course.
With the energy price cap set at £2,074 until September, electricity is capped at 30p per kWh with a 53p standing charge and for gas it is 8p per kWh with a 29p standing charge. This amount however does still vary depending on region.
When the price decreases to £1,923 fro October, electricity will be capped at 27p per kWh with a 53p standing charge and gas will be capped at 7p with a 30p standing charge.
Households using LPG and heating oil have also begun to receive discretionary payments to help them manage their bills. You can read more about this in our guide onhelp with heating oil costs.
Government plans to address long-term prices
Rising energy bills have been a key part of rising inflation in the UK. The price of wholesale gas in the UK rose to £5.55 per therm in August 2022, above the £4.93 in early March 2022 when Russia began its invasion of Ukraine.
Europe received roughly 40% of its natural gas from Russia, and while the UK only imported less than 5% of its gas from Russia, economic fears over Russia switching off its gas supply to Europe saw the UK affected by global market price increases.
However, wholesale energy prices are now coming back down. This has been reflected in the energy price cap which was reduced on 1 July to £2,074 and will remain so until September.
What additional government support is available?
A universal joint priority services register has been put forward by Ofgem aiming to simplify and streamline assistance for vulnerable households receiving specific means-tested benefits.
The joint priority services register is a free and voluntary system that your supplier uses to ensure the correct support is given to its most vulnerable customers.
Although, customers currently in need ofhelp with heating oil costsmust individually register with each utility company. The joint priority services register would combine the existing databases of energy firms and other utility services, including water suppliers, to make it easier for customers to find which provider offers them the right support.
Only customers deemed vulnerable qualify for means-tested benefits with vulnerability being determined by various factors, such as age, illness, disability, or the presence of young dependents in their household.
家庭被认为是脆弱的资格eans-tested benefits and receive the additional cost of living payments next year worth £900. Pensioner households will receive an extra £300, while people on disability benefits will get payments worth £150.
The government also launched anenergy MOTservice to help households establish how to make energy-saving improvements to their homes.
What is the energy price cap?
The Ofgem energy price cap is not to be confused with the government's energy price cap, called the Energy Price Guarantee. The Ofgem energy price cap was introduced in 2019 to limit how much firms can charge consumers and ensure that customers on default tariffs pay fair gas and electricity prices in the UK.
It is not a limit on consumer energy bills, but rather a cap on how much suppliers can charge per kWh of energy used and a maximum daily standing charge.
Ofgem had previously reviewed it every six months, but confirmed in 2022 that the energy price cap would be reviewed quarterly so it could bring stability to the energy market and reduce price shocks for consumers. This was before the government's price freeze superseded the price cap.
One of Ofgem’s directors, Christine Farnish, resigned over the announcement, claiming that the move “would add several hundred pounds to everyone’s bill in order to support a number of suppliers in the coming months”, adding that changes to the methodology used to set the cap appeared designed to protect private energy firms rather than prioritise homeowners’ needs.
How you can lower your energy bills
There are initiatives in place to provide homeowners with financial assistance in making energy efficiency improvements, includinginsulation grants
We've put together a comprehensive list ofenergy saving tipsto help you navigate the energy crisis and lower your heating bills.
Included are some quick fixes you can do in the short-term, such as swapping toLED light bulbs,and higher-value improvements which come from making long-term investments in your energy efficiency, such as making sure your home has efficient insulation. A study earlier this year revealed that householdssaved £200 per year over 10 yearshaving had new insulation installed.
The Energy Efficiency Infrastructure Group has called on the government to prioritise energy saving through home improvements, such as better insulation, which it says could save UK households more than £500 a year on energy bills.
What happens if my supplier goes bust?
Around two million households have seen their supplier cease trading since last summer, with around 40 energy suppliers ceasing trading since the beginning of 2021.
Bulb Energy, with 1.7 million customers, is one of the most high-profile firms to be affected, which was placed in Special Administration in December 2021.
If your supplier fails, Ofgem will make sure affected households continue to be supplied, and will not lose money owed to them. Your new energy supplier would then be responsible for taking on any credit balances you may have.
You can learn more about what to do if your supplier stops trading from theCitizens Advice Bureau.
What happens if I can't afford my bills?
Low-income households may be able to get discounts on their energy bills, with major suppliers including E.ON, EDF and British Gas offeringwarm home discount schemes.
Citizens Advice can also help if you are struggling to afford your fuel, and will take you through the steps you can take to sort this with your supplier.
