On 25 May, Ofgem set the energy price cap at £2,074. That’s a reduction of £1,206 from the previous cap of £3,280.
The current energy price guarantee (EPG) level ends on 30 June. This offered some protection for energy customers when energy prices were more volatile.
After July, energy unit prices will go back to being regulated by the price cap. Because of this, there could be more options for switching energy providers to save money.
What is the Energy Price Cap?
The energy price cap was introduced in 2019 to regulate what energy suppliers can charge per unit of energy. It helps to protect customers from paying high prices for their energy.
The price cap applies to customers on a default or standard variable rate energy tariff. Those on fixed energy deals aren’t affected by the price cap.
Remember, the price cap is a cap on what suppliers can charge per unit of energy - it's not a cap on your bill. So if you use more energy you could be charged more than the price cap amount.
What is the Prepayment Meter Price Cap?
The prepayment meter price cap works the same way as the energy price cap by limiting what suppliers can charge for energy per unit. Ofgem introduced the prepayment meter price cap in 2017.
How has the energy price cap changed?
The energy price cap has dropped by £1,206 and comes into effect between July and September 2023. This means the average household is likely to pay £2,074 for their energy costs between July and September.
The prepayment metre price cap has reduced by £1,248 from £3,325 to £2,077.
The reduction shows that the wholesale cost of buying and supplying energy has significantly reduced.
Although this is encouraging, bills aren’t expected to return to pre-2020 levels before the end of the decade. That’s according to independent energy experts, Cornwall Insight.
The energy price guarantee level is still in place until 30 June when the new price cap officially comes into effect. The government introduced this in October 2022 to limit the price of energy unit rates.
In February 2023, the default energy price cap decreased by nearly £1,000, from £4,279 to £3,280. The price cap for those with prepayment meters decreased by £1,034, from £4,358 to £3,325.
Will I be able to switch to another energy deal soon?
Yes, there should be more competitive energy deals available soon as the energy prices begin to stabilise. These could be available by July or before depending on suppliers.
To help you prepare for this, it’s worth signing up to our switch ready programme so we can tell you when there are more energy deals available. It takes less than 1 minute:
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Log in to your Confused.com account and confirm your address, energy usage and energy supplier's details.
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We'll send personalised energy deals straight to your inbox.
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Choose a deal you're happy with and we'll complete the switch for you.
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Energy price cap predictions and unit prices for the rest of the year
Here’s what the energy price cap* could look like for the rest of the year and early 2024:
| October to December 2023 | January to March 2024 | |
|---|---|---|
|
Electricity
|
£1,060.35
|
£1,084.74
|
|
Gas
|
£915.35
|
£960.22
|
|
Total
|
£1,975.70
|
£2,044.96
|
*All figures taken from Cornwall Insight. These are predictions only and could change.
Energy unit prices* for the rest of the year
| Electricity | October to December 2023 | January to March 2024 |
|---|---|---|
|
Standing Charge (£/day)
|
0.54
|
0.54
|
|
Price per unit (p/kWh)
|
29.8
|
30.65
|
| Gas | October to December 2023 | January to March 2024 |
|---|---|---|
|
Standing Charge (£/day)
|
0.3
|
0.3
|
|
Price per unit (p/kWh)
|
6.7
|
7.08
|
*All figures taken from Cornwall Insight. These are predictions only and could change.
How is the energy price cap calculated?
The energy price cap is based on a few different factors. Some of them are:
- The cost of fossil fuels
- Operating costs – for example, the cost for suppliers to send out tradespeople to fit smart meters or conduct general maintenance work
- Network costs – this covers building, operating and maintaining the pipes and wires that supply energy to your home
- Policy costs – for example government schemes to reduce emissions
To see the full list of factors, visit the Ofgem website.
What can I do if I'm struggling to pay my energy bills?
If you’re struggling to pay your energy bills, speak to your supplier.
Ofgem says that suppliers are obligated to offer payment plans and direct energy customers to any support that’s available.
The government also has some energy grants in place to help vulnerable people too.
Ofgem CEO, Jonathan Brearly says:
“Where people are struggling, we urge them to contact their supplier to make sure they're getting all the help and support they're entitled to. We also think that, with bills continuing to be so high, there's a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”
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