How the energy price cap is changing in July 2023 and what that means for you.
What is the energy price cap?
Usually, the price of variable tariff energy in Scotland, England and Wales is controlled by the energy regulator, Ofgem. The price cap determines the amount energy companies can charge for units of energy on a standard tariff. How much you pay depends on how much energy you use.
However, due to soaring energy prices after the start of the war in Ukraine, the UK government introduced the Energy Price Guarantee for households in October 2022. This was to protect households from unsustainable energy costs.
In Northern Ireland, energy prices were protected by the Energy Price Guarantee too.
What is the current energy price cap?
Until July 2023, energy prices are protected by the Energy Price Guarantee introduced by the UK government. Since October 2022, a typical household’s annual energy bill has been limited to £2,500.
When does the energy price cap change?
At the end of June, the Energy Price Guarantee will finish and energy prices will be determined by Ofgem’s energy price cap again.
Experts have estimated that due to falling wholesale prices, the annual bill for a typical household should decrease to around £2,074. This is 17% lower than the current Energy Price Guarantee.
In Northern Ireland, where energy is calculated differently, prices are estimated to drop to £1,950 per year for an average household.
Who sets the energy price cap?
The industry energy regulator Ofgem sets the energy price cap. Ofgem usually sets the energy price cap every three months.
What does the change in energy price cap mean for me?
From July, you should see a reduction in price in your energy bills.
Does the energy price cap affect me if I’m on a prepayment meter?
In England, Scotland and Wales, the UK Government has promised to bring pre-payment meter charges inline with those who pay by direct debit. This change is planned to happen between 1st July 2023 — 31st March 2024 and is funded by £200 million from the Energy Price Guarantee. Ministers have also requested a review on how to eliminate the prepayment meter ‘premium’ permanently from April 2024.
This means those on pre-payment meters should benefit from the reduced price cap in the same way as direct debit customers.
Usually, those on pre-payment meters who pay by cash, cheque or bank transfer end up paying a lot more. We hope that the changes to pre-payment meter charges will be implemented for the long term, so that however you pay for your energy, you will pay the same unit price.
