For the first time in 18 months, the Ofgem energy price cap has fallen below £2,000 a year. However, consumer groups are warning that this will not do enough to help relieve the high energy costs coming our way this winter. What does this mean for your upcoming energy bills? Read on to find out.
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From October, 29 million homes in England, Wales, and Scotland can now expect to pay an average of £1,923 a year. The energy regulator dropped the price cap down from £2,074 in the previous quarter. The price cap sets the maximum unit rate that energy and gas suppliers can charge and is adjusted quarterly.
Despite this price cap, the average household will still be stuck paying almost double for their gas and electricity than before Russia invaded Ukraine in February of 2022 and created a global energy crisis as a result.
Last year, the government provided £400 to support energy payments, but with that money no longer available, many people won’t really notice a difference in their accounts despite the new price cap because of rising standing charges.
A standing charge is a fixed charge collected from all households irrespective of how much gas or electricity they actually use. The charges vary by region and are included in the £1,932 cap number, but they have increased to an average of 83p this October, quite a jump from the previous average of 51p a day for electricity and gas in October 2021. On the whole, standing charges have risen to just over £300, nearly double from the previous average of £186 a year in October 2021.
This new rate will apply for the last three months of the year and will be reviewed and amended once more in January 2024. It’s important to remember that the price cap doesn’t limit the amount you can pay — if you use more energy, you’ll pay more.
The reprieve from October to December will be a short one as experts expect the price to rise again next quarter.
To discuss the effects of rising energy costs on your finances, get in touch with us today.