Ofgem has announced it is raising its price cap to £1,862 per year for a typical dual fuel household, up £221 or 13% on current levels.
– What is Ofgem’s price cap?
The energy price cap sets a maximum price that suppliers can charge customers in England, Scotland and Wales for each unit of gas and electricity they use.
It also sets a maximum daily standing charge – the cost of having your home connected to the grid.
The headline price cap figure provided by Ofgem indicates what a household using gas and electricity and paying by direct debit can expect to pay if their energy consumption is typical.
It is important to note that it does not limit a home’s total bills because people still pay for the amount of energy they use – so if that is above the average they will pay more, and if it is below they will pay less.
Energy is regulated separately in Northern Ireland.
– What’s changing with my energy bill this time?
The price cap taking effect from July 1 will rise by 13%, effective for the three-month period to September 30.
Customers will see a price increase of around 5% on their electricity bills, while gas bills are rising by 24%.
Ofgem said the increase was the result of higher wholesale gas prices, caused by the ongoing conflict in the Middle East.
– Didn’t the Government pledge to cut energy bills?
The last price cap, which took effect from April 1 and runs until June 30, was the first to reflect Chancellor Rachel Reeves’s promise last November that £150 would be cut from the average household bill.
She is achieving this by shifting 75% of the Renewables Obligation (RO) costs from household energy bills into general taxation, and scrapping the Energy Company Obligation (Eco) scheme introduced by the Conservatives in government, which was funded by bills and designed to tackle fuel poverty by improving housing conditions but has been beset with delivery problems.
This will mainly translate through to customer bills by a cut to households’ electricity unit rates.
Sadly, however, the latest increase will effectively cancel this out.
– Are prices going to keep going up?
Unfortunately, early predictions suggest they will. Analysts Cornwall Insight’s first forecast for for October to December puts the cap at £1,899 per year – a 2% rise on July’s cap, that would come in just as temperatures fall and energy usage rises.
The October figure will not be confirmed until August, and Cornwall Insight said there remained a considerable amount of time for wholesale market conditions to shift.
However, it warned “the direction of travel is being shaped by several unknowns that are unlikely to be resolved quickly”.
– Do I need to do anything?
Currently, 40% of household energy accounts – or 22 million – are fixed tariffs and are therefore unaffected by this price rise.
Those who have not yet signed to a fixed deal should consider one as soon as possible.
– How do I start the switching process?
As a rule of thumb, Which? recommends looking for deals – start with a price comparison website – that are cheaper than the price cap (this is where comparing gas and electricity unit rates is important, rather than looking at headline figures), not longer than 12 months and without significant exit fees.
Price comparison site Uswitch said households can currently lock in a rate that undercuts the July cap by around £250 for the average home, warning: “For anyone still on a standard tariff, your bill will go up unless you act.”
– What else can I do to cut my bills?
There are other ways to potentially save on your energy bills, including checking if your energy supplier offers free electricity, such as British Gas’s PeakSave or E.on’s Pledge tariff. This could help to reduce your bill without cutting back on usage.
Households should also check and adjust their boiler flow settings: If you have a combi boiler, reducing the flow temperature to 60C or below could lower your bills.
Using an air fryer instead of an oven will cut energy usage, as will turning down the thermostat, running the washing machine in off-peak hours and taking appliances off standby.
It is also important to avoid estimated bills. If you don’t have a smart meter, send regular meter readings to your supplier to ensure direct debits are set at the right amount.
