Families to be £150 better off from October after energy price cap announcement

Energy regulator Ofgem has announced a new energy price cap, meaning the average household's energy bills could fall by up to 7%

Many households should see a decrease in their energy bills this autumn, as energy regulator Ofgem has announced a lower energy price cap from October.

The cap has been lowered from £2,074 a year to £1,923 for a typical dual fuel household paying their energy bills by direct debit.

The energy price cap limits the amount suppliers can charge you for gas and electricity. The new cap, which will come into play on 1 October, means that the average household could save £151 a year.

However, there is no additional government help towards energy bills this winter, unlike the £400 energy help given in the winter of 22/23, so your bills may still end up being higher than last year.

So what does this mean for you and just how will it affect your energy bills? We've got the lowdown below.

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What is the energy price cap?

The energy price cap is a limit on the amount suppliers can charge you for each unit of electricity or gas you use. It's used to describe how much families with typical energy consumption can expect to pay on their energy bills each year

The cap changes 4 times a year – on 1 January, 1 April, 1 July and 1 October.

This October it's due to fall to £1,923 – this is down from the £2,074 cap which began in July.

However, it's important to remember the cap is NOT a cap on your energy bills.

It's based on the maximum standing charge – a fixed amount you pay daily for energy – and the per unit price. The figures are also based on a 'typical' family – a 'dual fuel household paying by direct debit based on typical consumption', says Ofgem.

This means that, depending on the amount of energy you use, you could end up paying more or less than the energy price cap

However, the new lower energy price cap means that the average energy bills for most people will be at their lowest levels in 18 months.

Why has it been reduced?

The Energy Price Cap has been reduced following sustained falls in wholesale gas and electricity prices, which means that the price per unit charge for energy has gone down.

It follows a 17% drop in July this year and the end of the Energy Price Guarantee (EPG).

However, prices are still significantly higher than in previous years.

What effect will this have on my bills?

While your bills could fall by about £151 a year, it all depends on how much energy you use – the more you use, the more you'll pay.

The average household will now pay £1,923 a year for their gas and electricity from 1 October, down from £2,074.

For prepayment customers, this will fall from £2,077 to £1,949 a year.

The new energy unit prices from 1 October will be:

Electricity:

• £0.27 per KWh
• Daily standing charge: £0.53

Gas:

• £0.07 per KWh
• Daily standing charge £0.30

But it could still mean that some customers end up paying more than last winter, according to think tank the Resolution Foundation.

This is because the Government handed out £400 of extra energy bill help per household for winter 2022 to 2023, which it is not doing this year.

The Resolution Foundation says that, without this support, millions of households with below-average usage will actually pay more than last winter on bills.

'The biggest falls in bills will be seen by households that use the most energy'

The foundation said:

'As a result the biggest falls in bills will be seen by households that use the most energy, while households that consume relatively little energy will face higher bills this winter than last.'

And former Labour minister Caroline Flint told Radio 4's Today programme that people are still living with bills that are '50% higher than pre-pandemic times'.

She said:

'We need a winter plan that is shared across government, local government, the NHS, housing providers and charities to make sure none of those people fall through the net this winter.'

Experts from Martin Lewis's Money Saving Expert website have also spoken out about how many people's bills won't necessarily decrease.

'Despite the drop,' MSE reports, 'energy bills will still likely be more expensive than last winter.'

The website adds:

'While falling energy bills will be a relief for many, most will still be paying more for their energy than they did last winter when you factor in the £400 energy bill support we all got from the Government.

'So far, no additional support has been announced by the Government for energy bills this winter.'

More financial help

If you're struggling financially, we've got plenty of tips and advice that may help.

We've got tips from Money Saving Expert Martin Lewis himself here.

Or head to our Cost of Living Hub for information on what benefits and entitlements you may be able to claim, whatever your circumstances – as well as all the benefits and financial support for single parents in 2023.

And why not chat to other parents in our Netmums Forum below?

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