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Ofgem energy price cap falls below £2,000 but consumers still face bills

The energy price cap has fallen below £2,000 a year for the first time in 18 months but consumer groups have warned that households will feel little relief from high energy costs this winter.

The 29 million households in England, Wales, and Scotland can expect to pay an average of £1,923 a year from October after the energy regulator dropped the price cap from £2,074 in the previous quarter.

The average household will still pay almost double the rate for their gas and electricity than before Russia’s invasion of Ukraine triggered a global energy crisis.

Many will see little difference in what they pay because the £400 support from the government given to all homes last winter is no longer available, and standing charges have risen from an average of £186 a year in October 2021 to just over £300.

Ofgem has trimmed the price cap, which sets the maximum unit rate that suppliers can charge and is adjusted every three months, because of a recent fall in gas and electricity market prices.

The new rate will apply from October to December before it is adjusted again in January. The cap does not limit the amount customers pay: those who use more energy pay more.

Ofgem has produced two numbers for the new price cap after changing how it calculates the typical energy bill. The £1,923 figure is comparable with the previous quarter. However, from now on, Ofgem’s cap assumes households will use 7% less electricity and 4% less gas than in previous years, meaning a lower cap of £1,834 when expressed as an annual dual-fuel energy bill for direct debit customers.

The fall could be temporary: the price cap is expected to rise again from January, according to the energy consultants Cornwall Insight. It will reach £1,932 then under the new calculation.

Consumer groups have urged households to pay attention to the cap on unit rates for gas and electricity instead of the average annual bill. Under the new cap, the price of electricity has fallen to 27.4p a kilowatt hour, from 30p a kWh previously, while the unit price for gas has fallen from 7.5p a kWh of gas to 6.9p a kWh.

In the winter of 2021, the average bill was £1,277, while last year typical bills were capped at £2,500 by the government, and households received £400 of support.

Budgets will also have been squeezed by an increase in the average standing charge – a fixed charge levied on all households regardless of how much gas or electricity they use. The charges, which vary by region and are included in the £1,932 cap number, have risen from an average of 51p a day for electricity and gas in October 2021 to 83p this October.

Jonathan Brearley, Ofgem’s chief executive, 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.”

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