Energy bills set to fall from July as new price cap announced

24th May 2024

Energy bills set to fall from July as new price cap announced

The energy price cap is the maximum amount energy suppliers can charge you for each unit of energy you use. It’s updated every three months by energy regulator Ofgem, to make sure that prices reflect changes in underlying energy costs, as well as inflation.

For the period 1 July to 30 September 2024, the price cap is set to fall to £1,568 (-7%). This is £122 lower than the existing price cap, which is in place from 1 April to 30 June (£1,690), and will bring energy prices to their lowest level since early 2022.

But this is the average a ‘typical’ household will pay. Ofgem estimates a typical or ‘medium-use household’ as those living in a 2-3 bedroom house with 2 or 3 people. The amount you pay will depend on how much energy you use, and where you live, as well as how you pay your energy bills.

You can read more about the average UK energy bill, depending on the type of property you live in, here.

Does the energy price cap affect me?

If you’re on a fixed tariff for your energy supply, there’ll be no change to how much you pay.

The energy price cap is only applied if you’re on a default energy, or standard variable, tariff. This includes those who pay by direct debit, standard credit, prepayment meter, or who have an Economy 7 (E7) meter.

From 1 October 2023, changes were made to how the discount is paid for homes that have pre-payment meters installed. Instead of being delivered as a discount to unit rates, a discount will be applied to the standing charge.

If you pay by direct debit, your energy bills are usually based on an estimate of how much you use. So if you’re in credit, it’s worth doing a meter reading and getting in touch with your supplier to check you’re still paying the right amount.

Energy price cap by payment type: April to June 2024

  Direct Debit Prepayment Standard Credit Economy 7*
Jan – Mar 2024 cap £1,928 £1,960 £2,058 £1,272
Apr – Jun 2024 cap £1,690 £1,643 £1,796 £1,125
£ change -£238 -£317 -£261 -£147
% change -12% -16% -13% -12%
         

 

Source: Ofgem. *Electricity-only tariff.

Energy price cap by payment type: July to September 2024

  Direct Debit Prepayment Standard Credit Economy 7*
Apr – Jun 2024 cap £1,690 £1,643 £1,796 £1,125
Jul – Sep 2024 cap £1,568 £1,522 £1,668 £1,037
£ change -£122 -£121 -£129 -£87
% change -7% -7% -7% -8%
         

 

Source: Ofgem. *Electricity-only tariff.

READ MORE: Find out how the Energy Price Cap is set

How will the price cap change impact my energy bills?

You can check the average rate charged per unit of energy used below, and compare that with your household energy bills to work out an estimate of your household’s energy usage.

Energy price cap: What’s the average rate charged per unit of energy used?

  Jan-Mar 2024 Apr-Jun 2024 Jul-Sep 2024
Gas 7p per kWh 6p per kWh 25p per kWh
29p per kWh 27p per kWh 25p per kWh 25p per kWh
       

 

Source: Ofgem. Based on average rates for direct debit users, which vary by region

Ofgem estimates a typical or ‘medium-use household’ as a two- to three-bedroom house with 2 or 3 people living in it.

If you live in a flat, or a one-bedroom house, your energy use is estimated to be ‘low’. And if you live in a four-bedroom home, with 4-5 people, your energy use is estimated to be ‘high’. See below.

Energy use Example – size of home & number of residents Typical annual gas use Typical annual electricity use
Low Flat or 1-bed house; 1-2 people 8,000 kWh 1,800 kWh
Medium 2-3 bed house; 2-3 people 12,000 kWh 2,900 kWh
High 4+ bed home, 4-5 people 17,000 kWh 4,300 kWh
  Source: Ofgem    

 

Source: Ofgem

The current rates and standing charges in your region are outlined here.

How much you’ll pay also depends on how energy-efficient your home is, and which appliances you use – and how often you use them.

Energy usage is calculated in kilowatt (kWh) hours, or units. One kWh is enough to power a 100-watt lightbulb for 10 hours, but in comparison, it takes 4.5 kWhs to power a single cycle of a tumble dryer.

Is there still a discount on energy bills?

This government’s Energy Bills Support Scheme – which gave all households a discount of £400 on their energy bills from late 2022 to early 2023 – has now ended. So when you’re working out how much your bills will be compared to last year, it’s good to keep in mind that these monthly reductions won’t apply.

There are some other government-funded schemes in England, Scotland and Wales to help with energy bills, available to certain eligible customers. If you live in Northern Ireland, you can find more information here.

One of the schemes that offers help during the winter months is the Warm Home Discount Scheme. Under previous schemes, if you get benefits, or if you or your partner get the Guarantee Credit element of Pension Credit, you could get a discount of £150 off electricity bill in winter, or £150 added to your prepayment meter. Or you could also get a discount on your gas bill instead if your supplier provides both gas and electricity.

Will there be a change to the standing charge on my bill?

The fixed standing charge you pay is just to have a connection, regardless of how much energy you use. It’s also used to cover things like maintenance of the supply network, take meter readings, and to support government and environmental schemes.

The amount you’ll pay depends on your supplier, what tariff you’re on, and where you live. From January to March 2024, the average daily standing charge for electricity was around 53p a day, and 30p a day for gas. That worked out at just over £300 a year on average. From April to June 2024, this has risen to 60p a day for electricity, and 31p a day for gas.

Ofgem launched a review into standing charges in 2023, and recommendations on changes to the charge are due to be published later this year. This formal consultation will lead to a policy on standing charges.

Will energy prices keep falling?

The Energy Price Cap covers a period of three months and changes four times a year: in January, April, July and October.

Analysts at Cornwall Insight – an independent energy research, analytics and consulting firm – forecast energy costs could rise again later in the year.

SOURCE: Rightmove