What is the Energy Price Cap?
What is the Energy Price Cap?
The Energy Price Cap is a way of controlling the price that suppliers can charge for a single unit of energy. Suppliers are the companies that sell energy to households. Ofgem, the energy regulator, sets a maximum price that energy companies can charge per unit of electricity or gas.
The Energy Price Cap is usually described by saying how much the average user would pay for their energy. At the moment, the Energy Price Cap is £2,500 per year in Great Britain and £2,109 in Northern Ireland until the end of June. However, a household that uses twice as much energy as the average household would get a bill for much more than £2,500. And a household that uses half as much energy as an average household would get a bill for much less than £2,500.
What has changed?
From October 2022, the Energy Price Cap was set to increase by 80%. The government has now introduced an Energy Price Guarantee. This means that energy prices will still increase, but by less. Households with average energy use can expect to pay £2,500 per year for their energy. This amount will stay the same until 30 June 2023.
From July to September 2023, households without a pre-payment meter will no longer receive the Energy Price Guarantee discount because the Ofgem price cap will be lower than the Energy Price Guarantee level. Ofgem price cap is set at £2,074 for a typical household per year.
The Energy Price Guarantee will remain in place until the end of March 2024 if energy prices increase above £3,000 per year.
There is a higher price cap for people with prepayment meters. This means that energy through a prepayment meter is a bit more expensive per unit than energy through a credit meter. From 1 July to 30 September 2023, prepayment customers will no longer pay more for their energy than those on direct debit, saving around £21 per year. The Energy Price Guarantee discount will be reviewed every 3 months in line with future changes to Ofgem's price cap.
What does this mean for you?
If you are on a default energy tariff (also called a Standard Variable Tariff or SVT), the Energy Price Cap applies to you. You will be charged no more per unit than the Energy Price Cap, and your energy costs per unit will be reduced in line with the Energy Price Guarantee. If you aren’t sure what kind of tariff you’re on, you can check your energy bill or talk to your supplier.
The Energy Price Cap is not applied to your total energy bill – it is applied to each individual unit of energy. If you use more energy, you will pay for more. So your energy bill might be higher or lower than the £2,500 average figure depending on how much energy you use.
Overall, energy is more expensive this year than it was last year. However, how much more you have to pay will depend on exactly how much energy your household uses.
How will you notice the changes?
To find out how much your energy is likely to cost, you can check the details on your energy bill. Make sure you are supplying regular meter readings so your supplier knows how much energy you’re actually using and can keep your bills accurate.
What help is available?
The government has announced extra help with energy bills through a £400 payment to be applied to the energy accounts of everyone who pays an electricity bill in Winter 2022/23. This will happen automatically, and you do not have to take any action to apply for the payment. How you receive the payment will depend on how you pay your energy bill and who your energy provider is.
Money Saving Expert has created a round-up of how the £400 is being paid depending on payment type and energy provider. Check how you will receive the £400 payment here.
If you are struggling badly with the cost of fuel, you can approach your council for help.
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