Millions saw their energy bills fall in October after a drop in the price cap, which limits how much suppliers can charge households for each unit of gas and electricity they use.
A typical dual-fuel household now pays £1,923 a year between October and December – down from £2,074 in the previous period.
What is the energy price cap?
In recent years, the cost of variable tariff energy deals in England, Wales and Scotland has been controlled by the energy price cap, which is now set every three months by Ofgem, the energy regulator.
The cap confirms the maximum price suppliers can charge households per unit of energy on a standard – or default – tariff in normal circumstances. It covers 29 million households.
Energy prices soared after Russia’s invasion of Ukraine in February 2022, so in October ministers said household bills would be limited by a temporary government guarantee instead.
Under this, a typical household’s annual gas and electricity bill stayed below £2,500 despite Ofgem’s cap increasing above this level.
The Energy Price Guarantee finished in June 2023, and the Ofgem cap once again determines how much customers can be charged.
Between October and December, typical bills will be £1,923, which is £151 less than the previous cap and £577 down on last winter. The next quarterly price cap announcement will be in November and will cover January to March 2024.
Energy is regulated separately in Northern Ireland, where bills are slightly lower.
What is a typical household?
The calculations for a typical household are based on a direct debit customer using 12,000 kWh (kilowatt hours) of gas and 2,900 kWh of electricity a year.
A kilowatt hour is a unit of energy used to calculate your bill.
However, most households aren’t typical.
Bills are based on how much energy you actually use, which depends on the number of people, the type of property and its energy efficiency.
What if I’m on on a prepayment meter?
In July 2023, Ofgem said “around 4 million” households had prepayment meters.
Under new rules, suppliers must give customers more opportunity to clear their debts, contacting them at least 10 times before installing a meter, and they cannot be installed at all in certain households.
Image source, Getty Images
Between October and December, the typical bill for prepayment households will be £1,949, down from £2,077, but still £26 more than for direct debit customers.
Typical bills for those who pay via cash, cheque or bank transfer, usually every three months, will be £129 more.
Will energy bills continue to go down?
It is is impossible to tell for certain, not least because wholesale energy prices are affected by global issues, such as the war in Ukraine.
However, energy consultancy Cornwall Insight forecasts that prices will rise again in January 2024.
It estimates that typical annual bills will rise to £1,996.
The consultancy does not expect energy prices to return to pre-Covid levels before the end of the decade.
Will this mean the return of switching?
Lower prices should restart competition in the market, as suppliers start to offer fixed deals to customers, which set gas and electricity prices for a certain period of time.
Unlike variable tariffs, these are unaffected by the cap.
Consumer groups and regulators say this could be good for consumers, but warn that such deals do not suit all circumstances.
If variable deals continue to fall in price, anyone already locked into a fixed deal would miss out on those savings.
Those considering signing up for a fixed deal should also pay close attention to standing charges and exit fees, rather than just the headline rate.
Image source, Getty Images
What extra support is available for energy bills?
- £900 to households on means-tested benefits – paid in three instalments in spring and autumn 2023 and spring 2024
- £300 for pensioner households
- £150 to people on certain disability benefits
Vulnerable families can also claim help through the Household Support Fund, and – from October 2023 – the Warm Home Discount scheme.
Importantly, the £400 discount which all households in England, Wales and Scotland received last winter has finished.
What help are businesses getting?
Until the end of March 2023, businesses had their costs limited under the government’s Energy Bill Relief Scheme.
Heavy energy-using sectors, like glass, ceramics and steelmakers, will get a larger discount than others.
