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- Author, Kevin Peachey
- Role, Living expenses of the reporter
The fall in domestic gas and electricity prices has now taken effect, but costs are expected to rise again in October.
Regulator Ofgem’s new price cap for England, Wales and Scotland came into effect on Monday, meaning a typical household’s energy bill will drop by £122 a year.
This brings the bill for a household using a typical amount of gas and electricity down to £1,568 a year, the lowest figure for two years.
But forecasters expect it to rise again in the run-up to winter, more than reversing the latest decline.
Leading consultancy Cornwall Insight predicts the typical household’s annual bill will be back up to £1,723 in October, up £155 or 10% from now.
“Slight falls in the summer look set to be wiped out by bigger increases in the autumn when people will have to turn their heating back on,” said Adam Scorer, chief executive of the charity National Energy Action.
“Energy costs remain an unaffordable luxury that many of the poorest simply cannot afford.”
Although the price cap changes every three months, Ofgem illustrates it on an annual bill for a household using a typical amount of gas and electricity.
People in larger properties will tend to pay more overall due to higher energy use, and people in smaller properties will pay less.
This is because the cap set by Ofg limits the maximum price that can be charged for each unit of gas and electricity – not the total bill.
It affects the gas and electricity bills of 28 million households but does not affect customers in Northern Ireland, where the sector is regulated differently but where prices are also falling.
Energy bills are significantly lower than peaks after Russia’s invasion of Ukraine, when the government intervened to limit rising bills.
This translated into a decline in the general rate of price growth, known as inflation.
But the typical household’s energy bill remains around £400 higher than it was three years ago, sparking debate over the issue during the election campaign.
In addition, households have built up a collective debt to suppliers of around £3bn, mainly due to pressure from high prices.
Prepaid meter users, who tend to top up their meters during the colder, darker months and are often under more financial pressure, will see a less immediate impact from the summer price drop.
The vast majority of households pay by direct debit and their payments are smooth throughout the year. They should be contacted by their supplier for the latest price changes.
Experts say it’s a good idea to make the deduction now to ensure ratepayers are charged the correct rate.
Ofgem is reviewing the way the price cap is calculated, including looking at a number of responses to the fixed charges consultation.
Latest changes in details
The new prices, which came into effect from July to the end of September, mean:
- Gas prices are now capped at 5.48 pence per kilowatt hour (kWh) and electricity at 22.36 pence per kWh
- A typical household uses 2,700 kWh of electricity and 11,500 kWh of gas per year
- Households with pre-paid meters pay slightly less than those with direct debit, with a typical bill of £1,522
- Those who pay their bills every three months by cash or check pay more, with a typical bill of £1,668
- Fixed charges – a fixed daily charge covering the cost of connecting to a supply – are unchanged at 60p a day for electricity and 31p a day for gas, although they vary by region
How to keep energy consumption – and bills – low
Experts share three tips to stay on top of your energy use during the warmer months:
- If your hot water is too hot to wash your hands in, then your setting is too high, so turn off the boiler
- Manage your draft, such as placing a black crumpled paper bag in an unused chimney, or reduce other drafts in the home
- Limit your shower time to four minutes. The charity WaterAid has compiled a list of four-minute songs that are external to keep you in time