Ofgem is lowering the energy price cap this winter
It's going to go under £2000 for the first time since March 2022
Ofgem has revealed its lowering the energy price cap from the current £2,074 per year, to £1923, for the average household in England, Wales and Scotland.
It'll come into force from October the 1st, and is the lowest price cap since March 2022.
Ofgem chief executive Jonathan Brearley said: “It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter.”
Despite the cut, many households will likely still see higher bills this winter than last year, as Government payments to help with energy bills stopped back in March.
The cap, which limits the amount a supplier can charge per unit of gas or electricity they sell, will cut around £150 a year off the average household energy bill from the start of October.
It's all based on an estimate that the average household uses 2,900 kWh of electricity and 12,000 kWh of gas.
Last winter the average household energy bill was £2,500 per year, thanks to the Government’s Energy Price Guarantee scheme.
Households were also getting £66 per month taken off their bills by the Government.
The average household therefore would be paying around £141 per month after the discount over the winter months if they were on a direct debit payment plan.
Households using the same amount of energy this winter will be paying around £160 per month.
The new normal
This drop isn't set to last for long though, with all bills expected to rise again in January, wiping out the gains made in this price cap.
Forecasters at Cornwall Insight expect that bills have hit something of a new normal and will stay close to current levels until at least October 2024.
It has caused charity National Energy Action (NEA) to warn that 6.3 million households could be trapped in fuel poverty this winter. It is somewhat less than last year, but far ahead of the 4.5 million in October 2021.
“The price cap does not protect those who simply cannot afford the cost of keeping warm,” said NEA chief executive Adam Scorer.
“The UK Government can still act – by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households.
“It knows how to do it. It has millions of pounds unspent from previous schemes. It is aware that failing to act will consign millions to another winter of despair and suffering.”
Ofgem's changed the way it calculates average bills
Ofgem has also updated the way it calculates the average annual bill. It now thinks the average household consumes around 500 kWh of gas and 200 kWh of electricity less than it used to. Taking this into account, the average bill is expected to fall to around £1,824 per year.
Now that higher energy costs seem to be here to stay for the medium term, experts say the best way to reduce bills is to reduce the amount of energy that people need.
Better insulated homes will need less gas, and people can also do things like turn down their boilers’ flow temperature to reduce their gas use, without making their homes colder.