Introducing a New Online Calculator to Determine the Impact of Ofgem Energy Price Cap Changes on Your Bills
Discover how adjustments to the Ofgem energy price cap will influence your gas and electric expenses with the help of a new online calculator. The average UK household can expect a drop of £150 in their bills, thanks to Ofgem’s decision to lower the energy price cap. This change will go into effect on Sunday, October 1.
The current energy price cap, which covers the period from July to September, stands at £2,074 for typical energy usage between July and December 2023. However, after this weekend, the price cap will decrease to £1,923. This cap is set four times a year by Ofgem, with the next decision scheduled for January 2024.
To ensure you benefit from the lower rate, experts recommend taking a reading (if you don’t have a smart meter) before Sunday and providing it to your energy supplier. This way, any energy consumed from October 1 onwards will be charged at the new, more affordable rate, preventing overcharging.
To see how your energy bills will change as a result of the £150 drop in the Ofgem price cap, simply enter your details into the Nous.co calculator provided below:
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CEO and co-founder of household money-saving tool Nous.co, Greg Marsh, advises everyone to take a few simple steps before the new energy price cap takes effect. First and foremost, individuals without a smart meter should take a reading and submit it to their supplier before Sunday. This will ensure that they are billed at the new, lower rate for all energy consumption starting October 1, avoiding any overcharges.
While the energy bills of Britons are expected to become more stable, Ofgem warns that volatility is likely to persist for some time due to high inflation and the ongoing cost-of-living crisis. Last month, Ofgem confirmed that the price cap will decrease in response to declining wholesale costs. Gas prices will decrease from 6.9p per kilowatt hour (kWh) to 6.89p, while electricity prices will fall from 30.1p per kWh to 27.35p.
Marsh advises individuals who pay by direct debit to ensure their payments are set at the correct level as winter approaches. Energy companies typically set monthly payments at one-twelfth of annual usage. This means credit accumulates during the summer months for higher winter consumption. If no credit balance has been built over the summer, it may be necessary to increase monthly payments to compensate for greater fuel usage during the colder months. Conversely, if the credit balance is significantly higher than the monthly payment, it may be set too high and can be reduced.
Marsh further cautions against committing to fixed energy deals when shopping around for cheaper options. For most people, fixed deals are not the best option at this time, as suppliers are promoting them just before the price cap falls, making it appear as though the savings are greater than they actually are. Fortunately, there are smarter ways to save on bills, including energy costs. Nous.co can save the average household hundreds of pounds per year and can reduce energy costs by approximately £150 without requiring a fixed deal.
To alleviate the impact of rising prices, the UK government plans to provide a £300 cost of living payment to millions of households in the upcoming weeks. However, despite the decrease in the energy price cap, many households can still expect to pay more for their energy this winter compared to the previous year. Ofgem CEO Jonathan Brearley acknowledges that the market remains tight. The average UK household bill is estimated to reach £1,923 per year, with prepayment meter users paying an average of £1,949.
The drop in the price cap is initially seen as positive news for households. However, it is important to note that last winter, the cap was effectively overshadowed by the government’s Energy Price Guarantee, which kept the average bill at £2,500. Additionally, the government provided a monthly payment of around £66 towards each household’s energy bill. This support is not available this winter, resulting in higher monthly bills compared to the previous year for many households. The Resolution Foundation think tank warns that over a third of households in England, a total of 7.2 million, will face higher bills this winter. While the price per unit of energy is decreasing, this will be offset by an increase in the daily standing charge and the discontinuation of the £400 universal payments.
According to Ofgem CEO Brearley, while falling wholesale gas prices have resulted in a drop in the energy price cap below £2,000, prices are still more than 50% higher than they were prior to the Russia-Ukraine conflict. Brearley suggests that the government should provide long-term support to financially burdened families by introducing a new social tariff for energy bills.
Introduced by the government in January 2019, the energy price cap establishes the maximum price that energy suppliers can charge consumers in England, Scotland, and Wales for each kilowatt hour (kWh) of energy consumed. The goal is to ensure fair pricing and limit supplier profits. Ofgem adjusts the cap every three months based on the average household’s expenses. It’s important to note that Ofgem’s cap does not cover Northern Ireland.
In summary, the new online calculator offers a convenient way to determine how the upcoming decrease in the Ofgem energy price cap will impact your gas and electric bills. By taking a few simple steps, such as providing a reading to your supplier and ensuring correct payment levels, you can make the most of the lower rates and avoid overcharging. Despite the decrease in the price cap, households may still face financial challenges due to high inflation and rising costs. The government’s cost of living payment can provide some relief, but it is crucial to consider smarter ways to save on bills, including energy costs.
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