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

Energy bills

Ministers urged to intervene as households queue for another winter of tight budgets

Fri Aug 25 2023 02.01 EDT

The energy price cap has fallen below £2,000 a year for the first time in 18 months, but consumer groups have warned 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 lowered the price cap of £2,074 in the previous quarter.

The average household will still pay almost twice as much for its gas and electricity as it did before Russia invaded Ukraine, triggering a global energy crisis.

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

Ofgem has reduced the price cap, which sets the maximum unit tariff that suppliers can charge and which is adjusted every three months, due to the recent drop in gas and electricity market prices.

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

Ofgem has produced double figures for the new price cap after changing the way it calculates the typical energy bill. The figure of £1,923 is comparable to the previous quarter. However, from now Ongem’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 it is expressed as an annual dual-energy energy bill for direct debit customers.

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

Consumer groups have urged households to pay attention to the gas and electricity unit price cap rather than the average annual bill. Under the new cap, the price of electricity fell to 27.4 per kilowatt hour, from 30 pence per kWh previously, while the unit price of gas fell from 7.5 per kWh of gas to 6.9 per kWh.

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

Budgets will also have been reduced by an increase in the average permanent charge – a fixed charge levied on all households, regardless of how much gas or electricity they use. Charges, which vary by region and are included in the £1,932 cap, have fallen from an average of 51 pence a day for electricity and gas in October 2021 to 83 pence in October.

Jonathan Brearley, Chief Executive of Ofgem, said: “It is good news that the price cap continues to fall; however, we know people are grappling with broader cost-of-living issues and I can’t offer any certainty that things will ease this winter.

Gillian Cooper, Energy Policy Manager at Citizens Advice, said: “A growing number of people we help are on a negative budget, where they simply don’t have enough money to cover even their essential bills. The next few months will push households like these over the edge. Our data suggests that the situation will be as bad, if not worse, than last winter.

“The government must act quickly by providing more targeted support to households that need it most. »

The energy cost crisis has fueled calls from Westminster and the energy sector for government ministers to do more to help vulnerable households pay their energy bills by setting a ‘social tariff’.

The government promised to consider legislation that would offer a tariff well below the market rate, but in a recent consultation on changes in the energy market, no social tariff was included.

The government offered all bill payers a one-time payment of £400 as part of its energy bill support scheme last winter. For the coming winter, the government will offer targeted support, including a payment of £900 for people on means-tested benefits, £300 for pensioners and a further £150 for people with disabilities.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “The government seems to lack the enthusiasm to help people get through the crisis in energy bills, and there is also a lack of time to act to keep people warm. This year. winter.”

Ed Miliband, shadow secretary for energy and net zero, said Labor would boost the windfall tax on North Sea oil and gas companies to fund additional financial support in the crisis of the cost of the life. “These figures demonstrate that the outrageous Tory cost of living crisis is still raging for millions of people,” he said.

For households with a prepaid meter, the cap will drop to £1,949 from October, down from £2,077 in the previous quarter. For those paying by cash or cheque, the cap will increase from £2,211 to £2,052. They pay more because it costs energy companies more to serve them, Ofgem said.

The regulator has confirmed that energy companies will increase the amount of their profits from the £2 price cap for each average customer. The regulator hopes to allow suppliers to recover losses incurred during the energy crisis to prevent more companies from going bankrupt.

However, allowing companies to make bigger profits while households struggle to pay their bills could spark more public anger at energy companies.