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What is the Ofgem energy price cap and how much are bills going down? | |
(about 1 month later) | |
Energy bills will fall by more than 12% for most people in England, Scotland and Wales from April. | |
A new price cap has been announced by energy regulator Ofgem, which sets the maximum price suppliers can charge households for each unit of gas and electricity they use. | |
What is the energy price cap? | What is the energy price cap? |
The energy price cap is set every three months and covers 29 million households in England, Wales and Scotland. | |
It fixes the maximum price that can be charged for each unit of energy on a standard - or default - tariff for a typical dual-fuel household which pays by direct debit. | |
Gas prices will be capped at 6p per kilowatt hour (kWh), and electricity at 24p per kWh. Currently, gas is 7.42p per kWh and electricity 28.62p per kWh. | |
When prices soared after Russia invaded Ukraine in 2022, the government introduced a temporary Energy Price Guarantee to limit bills. However, Ofgem is again responsible for deciding how much customers can be charged. | |
The cap does not apply in Northern Ireland, which has its own energy market. Prices are also falling there. | |
How much is my bill likely to go down? | |
Ofgem says that, from April, an average household paying by direct debit for dual fuel will pay £1,690 a year, a drop of £238 from the previous cap. | |
Should I fix my energy prices? | |
The fall in energy prices has raised hopes that suppliers will offer cheaper, fixed-price deals. | |
These offer certainty for a set period, but if prices drop further people can find themselves stuck at the higher price. | |
Analysts at Cornwall Insight predict the price cap will see a small fall in July, but increase slightly in October. | |
When considering a fixed-price deal, Ofgem says people should seek independent advice and "consider what is most important for them, whether that's the lowest price or the security of a fixed deal". | |
Price comparison website Uswitch says it expects "increased competition" from suppliers, but warns that people should check for exit fees they might have to pay if leaving a fixed deal early. | |
What are standing charges? | |
Although the overall cap has fallen, standing charges - a fixed daily amount which covers the costs of connecting to a supply - have increased. | |
Standing charges will be 60p a day for electricity and 31p a day for gas, although they vary by region. | |
The regulator will also add £28 to everyone's bill over a year to cover the cost of dealing with £3.1bn of debt that customers owe to suppliers. | |
What is a typical household? | What is a typical household? |
How much you pay for energy depends on the overall amount of gas and electricity you use. | |
But the type of property you live in, how energy efficient it is, and how many people live there, also affect your bill. | |
The Ofgem cap is based on a "typical household" using 11,500 kWh of gas and 2,700 kWh of electricity a year and paying by direct debit. | |
The vast majority of people pay their bill this way, to help spread payments across the year. | |
Those who pay every three months by cash and cheque are charged more. Their typical annual bill from April will be £1,796, which is £106 more a year than that of a direct debit customer. | |
What is happening to prepayment customers? | |
Households on prepayment meters will now pay the same as those on direct debit. Previously they were charged more. | |
About four million households had prepayment meters in July 2023, according to Ofgem. | |
Many have been in place for years, but some meters were installed more recently after customers struggled to pay their bills. | |
New rules mean suppliers must give customers more opportunity to clear their debts, and they cannot be installed at all in certain households. | |
What support is available for energy bills? | |
Certain groups - such as pensioners and those on some means-tested or disability benefits - received extra cost-of-living payments when bills soared. | |
But much of that extra support has now finished. | |
The £500m Household Support Fund which the government introduced to help with costs in September 2021 will end in March 2024. | |
However, the Warm Home Discount scheme will continue to offer a discount to eligible pensioners and low income households. | |
The government's Fuel Direct Scheme can help you repay a debt from your benefit payments. | |
In addition, energy suppliers must offer customers affordable payment plans or repayment holidays if they are struggling to pay bills. | |
Most suppliers also offer hardship grants. | |
What can I do if I can't pay my energy bill? | What can I do if I can't pay my energy bill? |
Ofgem: Help with bills | Ofgem: Help with bills |
What help are businesses getting? | What help are businesses getting? |
The energy support scheme for businesses, which offered firms a discount on wholesale prices, will end in March 2024. | |
The scheme offered a larger discount to heavy energy-using sectors, like glass, ceramics and steelmakers. | |
Rising bills mean chip shop is not viable - owner | Rising bills mean chip shop is not viable - owner |
Related Topics | Related Topics |
Energy customer switching | Energy customer switching |
Ofgem | Ofgem |
Personal finance | Personal finance |
Energy industry | Energy industry |
Cost of Living | Cost of Living |
Oil & Gas industry | Oil & Gas industry |
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