What is the energy price cap on bills?

The energy price cap is a regulatory measure implemented by the UK government to limit the amount that energy suppliers can charge their customers for their gas and electricity. The price cap was introduced in January 2019, and it is reviewed twice a year by the energy regulator, Ofgem.

The price cap applies to customers on default tariffs or standard variable tariffs, which are the most expensive rates that energy suppliers offer. The price cap is calculated based on a formula that takes into account wholesale energy costs, network costs, and supplier costs. The cap is designed to protect customers from being overcharged for their energy and to ensure that they pay a fair price for their energy supply.

In October 2021, Ofgem raised the energy price cap to £1,277 per year for customers on default tariffs or standard variable tariffs. This represented an increase of £139 per year, or 12.2%, from the previous cap level of £1,138 per year.

From 1 October 2022 through 3 March 2023, the average unit price for dual fuel customers on standard variable tariffs covered by Ofgem’s price cap is restricted to: 34.0p/kWh (pence per kilowatt hour) for electricity and 10.3p/kWh (including of VAT) for gas.

The price cap applies across the whole of the UK, including Scotland and England. However, customers on fixed-rate tariffs or prepayment meters are not affected by the price cap, as their rates are already set in advance.

It’s worth noting that while the price cap does provide some protection for consumers, it should never be the sole reason to stay on an expensive energy contract, especially if you are not necessarily getting the cheapest energy deal available. Customers are encouraged to shop around and switch to a better deal if they can find one, as this could save them money on their energy bills.

What is the energy price guarantee?

Much like the price cap, the Energy Price Guarantee (EPG) was set up to support he vast majority of people who are on normal rates in England, Scotland, and Wales. The energy price guarantee went into effect on October 1, 2022. It will be in effect until at least April 2023 and is on average 27% higher than the price cap that was in place prior to October 1, 2022. There is, however, a standing charge and unit rate cap rather than a cap on the overall amount you pay. This implies that you will pay more if you consume more energy.

As a result, homes in Great Britain using ordinary amounts of energy will spend, on average, about £2,500 per year until March 31, 2023, and about £3,000 per year until March 31, 2024. This will lower the unit cost of gas and electricity. These numbers are based on an average household’s consumption of gas and electricity, with both bills being paid by direct debit. Overall though, the amount you pay will be dependent on how much energy you use in your home or business.

As of 27 February, 2023,  Regulator Ofgem disclosed the new price cap, which will take effect in April and average £3,280 per year. However, this does not have a significant impact because the energy price guarantee (EPG), which now sets the price of energy, is slated to increase from £2,500 to £3,000 per year.

The Energy Price Guarantee unit rates and standing charges

With the EPG, average standard charges apply depending on a number of regional factors, your energy tariff, and how you pay for your energy.

For dual-fuel customers paying by direct debit under the Government’s guarantee, we found that the average standing charge will not change from what was applied in October 1 – 31 December, 2022. This means that

• Gas wills stay at a unit rate of 10.33p per kilowatt hour (kWh) with a standing charge of 28.49p per day
• Electricity will stay at a unit rate of 34.04p per kWh alongside the standing charge at 46.36p per day

Typical energy users who pay each month after getting their bill rather than beforehand have found their averages are 6% higher.

Prepayment customers should expect a small change in charges for electricity and gas…

For gas,

• Prepayment customers unit rate will go up from 10.63p per kWh to 10.82p per kWh
• Standing charges will remain the same though, at 37.51p per day

For electricity,

• Prepayment customers will see unit price reductions, from a rate of 33.08p per kWh to 33p per kWh
• Standing charges for electricity prepayment customers will remain the same, at a standing charge of 51.41p per day

If a home or business pays for their energy usage on receipt of the bill, they will not see too many changes per unit of energy.

For gas,

• The unit rate will remain the same at 11.27p per kWh
• The standing charge will also remain the same as before at 33.54p per day

For electricity customers,

• There will be a rise in unit rate for electricity, from 36.80p per kWh to 37.67p per kWh
• The standing charges will remain the same as before, at 52.40p per day

If you are struggling to pay your energy bills, there are some things you should know!

Each home will receive a £400 rebate on their electricity and gas costs. The payment schedule, which will begin in October, may vary depending on your energy company and how you pay your energy bills. Click here to find out more.

You can contact your energy supplier at any time if you are worrying about the cost of your energy use, or want to know more about how the price guarantee will be applied to your account. There are also a number of funding options available to you.

The Energy Bills Support Scheme

The Energy Bill Support Scheme is a program that provides financial assistance to eligible households in the United Kingdom to help them pay their energy bills. The scheme was introduced by the UK government to help low-income households and those on certain benefits cope with the cost of heating and lighting their homes during the winter months.

Under the Energy Bill Support Scheme, eligible households can receive a one-off discount on their energy bills, known as the Warm Home Discount. The discount is applied directly to the energy bills of eligible households and is usually paid between October and March.

To be eligible for the Warm Home Discount, households must be on a low income or receive certain means-tested benefits. The specific eligibility criteria can vary depending on the energy supplier, so it’s important to check with your supplier to see if you qualify.

In addition to the Warm Home Discount, some households may also be eligible for other forms of energy bill support, such as the Winter Fuel Payment or the Cold Weather Payment, which provide additional financial assistance during periods of particularly cold weather.

Overall, the Energy Bill Support Scheme is an important program for helping vulnerable households in the UK access the energy they need to stay warm and comfortable during the winter months.