Energy Price Cap Update

For those on a standard variable tariff, the energy price cap likely influences your charges. Here's what you need to know about how it affects your bills.

Current energy price cap

The energy price cap is updated quarterly, changing four times a year. The current cap is £1,690 per year for the average household using both gas and electricity and paying via Direct Debit. Ofgem has announced that this will decrease to £1,568 annually starting 1 July 2024.

Energy price cap for April 2024

On 1 July 2024, the cap will reduce to £1,568 annually. This will remain in effect until 30 September 2024, after which a new cap will be implemented.

Who does the energy cap apply to?

The cap applies to customers on a default energy tariff, also known as a standard or 'standard variable tariff' (SVT). It does not apply to fixed-term energy tariffs or specific exempted green energy tariffs.

Purpose of the energy price cap

The energy price cap was introduced to protect consumers from unfair pricing, ensuring suppliers pass on only legitimate cost increases and decreases to their customers. It also allows suppliers to recover costs when wholesale prices rise.

How is the price cap determined?

The cap is based on the costs to supply energy, including wholesale market conditions and the cost of buying international oil and gas. Ofgem also considers network costs for transporting energy, which vary by region. Suppliers can charge below the cap but cannot exceed it.

Maximum payment under the energy price cap

The cap limits unit rates and daily standing charges, not the total bill. High usage can result in higher bills, so the cap doesn't guarantee a maximum bill amount.

Identifying a default tariff

If you're unsure about your tariff, check with your supplier. Bills without a contract end date typically indicate a default tariff.

Impact of the energy price cap

The cap influences bills on default tariffs based on wholesale energy costs, leading to variable bills. It does not provide absolute protection from rising costs, as the cap adjusts with wholesale price changes.

Comparing the price cap with fixed rate tariffs

Prices on default tariffs fluctuate, while fixed-rate tariffs maintain the same price throughout the contract. Fixed rates may cost more if prices drop but can save money if prices rise. 

Can I switch suppliers again?

While the cap made default tariffs competitive, switching is always an option. Some providers now offer attractive fixed-rate tariffs, so explore to find a better deal.

Assistance for struggling with energy bills

If you're facing difficulties, several schemes can help:

• Warm Home Discount Scheme - Offers a one-off £150 discount between September and March for eligible low-income households.
• Winter Fuel Payments - Tax-free payments of £250 to £600 for those born before 26 September 1956.
• Cold Weather Payments - Automatic payments for certain benefit recipients during cold spells.

Tips for saving on energy bills

In addition to the basic strategies, consider these extra tips for reducing your energy bills:

• Use energy-efficient appliances - Invest in appliances with high energy efficiency ratings. Although they may have a higher upfront cost, they can save you money in the long run.
• Install a smart thermostat - Smart thermostats allow you to control your heating and cooling more precisely, reducing energy waste when you're not home.
• Regular maintenance of heating systems - Ensure your boiler and heating systems are regularly serviced to run efficiently and prevent energy wastage.
• Draught-proof your home - Seal gaps around doors, windows, and floors to prevent heat loss. This can significantly reduce your heating bills.
• Use energy-saving bulbs - Replace traditional bulbs with LED or other energy-saving options to cut down on electricity usage.
• Optimise water heating - Set your water heater to a lower but comfortable temperature and insulate hot water pipes to retain heat.

Implementing these strategies can help manage and lower your energy bills effectively, ensuring that you stay within your budget while maintaining comfort at home.