This weekend, millions of households across the United Kingdom are set to enjoy a welcome drop in energy costs as the Ofgem price cap falls to £1,923 per year for the average home, a decrease of £151.00. However, to ensure accurate billing, it is crucial to provide your energy provider with meter readings before the price cap adjustment takes effect on October 1st.
What is the Ofgem Price Cap?
The Ofgem price cap sets limits on how much you can be charged for your gas and electricity usage if you are on a variable-rate tariff and pay by direct debit. Almost all UK households currently benefit from this cap, which is reviewed four times a year. The next decision on the price cap takes place during November, and is scheduled to take effect from January 2024.
The price cap currently stands at an average of £2,074, falling to £1,923 on 1st October 2023. In this article, we’ll explore the implications of these price cap changes on your energy bills and why submitting meter readings is essential.
How the Price Cap Affects Your Energy Bills
The impact of the price cap on your energy bills depends on various factors, including your tariff, meter type, and energy consumption.
This price reduction is attributed to the declining wholesale energy prices, which energy providers like British Gas purchase and subsequently offer to consumers1. However, the exact amount you pay will vary depending on your energy consumption. The price cap only sets a limit on the maximum charge for the units of gas or electricity you use. Therefore, your actual bill will depend on your energy usage, which tends to increase as winter approaches and heating systems are used more frequently.
Meter Type and Its Impact
Meter type also plays a role in how the price cap affects your energy bills. For those using pre-payment meters, according to the Ofgem report, the price cap will decrease from an average of £2,077 to £1,949 in October. Customers with credit meters, on the other hand, currently pay an average of £2,211, which will drop to £2,052 from October 1st.
Standing Charges
The Ofgem price cap also regulates standing charges, which can vary based on your location. For electricity, the average standing charge remains at 53p per day and will not change on October 1st. However, the typical standing charge for gas will increase slightly by 1p, reaching 30p.
Special Considerations
Customers with Economy 7 meters will see a decrease in their price cap, from a typical rate of £1,400 for electricity usage to £1,298 in October2. Additionally, households that consume more than £3,000 of energy per year will have their bills capped through the Government’s Energy Price Guarantee. This government scheme, initially launched at £2,500 in October 2022, was raised to £3,000 in July 2023.
Submit a Meter Reading
Given the impending price cap changes on October 1st, it is vital to provide your energy provider with a meter reading. This ensures that your billing accurately reflects your gas and electricity usage for the upcoming billing period, which runs from October 1st to December 31st. Without an up-to-date meter reading, energy companies may rely on assumptions to calculate your bill, potentially leading to inaccuracies. It’s advisable to submit meter readings before price cap increases, but even when the price cap falls, as it will on October 1st, providing accurate readings ensures certainty regarding your energy bill and prevents unexpected charges.
The Future of Energy Bills
As for the future of energy bills, Ofgem does not make predictions about price cap changes. However, experts in the field, such as analysts from Cornwall Insight, typically offer accurate energy bill price forecasts. Cornwall Insight anticipates that from January 1st, the typical household will pay around £2,032, which will decrease to £1,964 in April, further drop to £1,917 in July, and then rise again to £1,974 by the following October.
The drop in the Ofgem price cap to £1,923 is excellent news for households, offering some relief from high energy bills. To ensure you benefit from this reduction and avoid billing discrepancies, submitting a meter reading is essential before the cap adjustment on October 1st. Keep in mind that your actual bill depends on various factors, including your meter type and energy usage. Stay informed about future price cap changes by following expert predictions, and remember that accurate meter readings provide transparency and certainty in managing your energy expenses.
Sources
Ofgem (2023) Energy prices to fall again this winter. Available at: https://www.ofgem.gov.uk/publications/energy-prices-fall-again-winter (Accessed 26 Sep 2023)
Ofgem (2023) Energy Price Cap (Default Tariff) Update from 1 October 2023. Available at: https://www.ofgem.gov.uk/sites/default/files/2023-08/Energy%20Price%20Cap%20Letter%20for%201%20October%202023.pdf (Accessed 26 Sep 2023)
UK Government (2022) Policy Paper: Energy Price Guarantee. Available at: https://www.gov.uk/government/publications/energy-bills-support/energy-bills-support-factsheet-8-september-2022 (Accessed 26 Sep 2023)
Cornwall Insight (2023) Cornwall Insight’s final forecast for the October price cap. Available at: https://www.cornwall-insight.com/press/cornwall-insights-final-forecast-for-the-october-price-cap/ (Accessed 26 Sep 2023)
All the information in this article is correct as of the publish date 28th September 2023. The opinions expressed in this publication are those of the authors. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.
