Image source, Getty Images
- Author, Kevin Peachey
- Role, Cost of Living Correspondent
The reduction in gas and electricity prices for private households is now having an effect, but costs are likely to rise again in October.
Regulator Ofgem’s new price cap for England, Wales and Scotland came into force on Monday and means a typical household’s energy bill will fall by £122 a year.
This will reduce the bill for an average household using gas and electricity to £1,568 per year, the lowest in two years.
But meteorologists expect temperatures to rise again in the run-up to winter, more than reversing the recent decline.
Leading consultancy Cornwall Insight predicts that the annual bill for a typical household will rise again to £1,723 in October, an increase of £155 or 10% on now.
“Small declines in the summer are expected to be offset by larger increases in the autumn when people have to turn the heating back on,” said Adam Scorer, chief executive of the charity National Energy Action.
“Energy costs remain an unaffordable luxury that many of the poorest simply cannot afford.”
Although the price cap changes every three months, Ofgem illustrates it using an annual bill for a household using a typical amount of gas and electricity.
Due to higher energy consumption, residents of larger properties tend to pay more overall, while residents of smaller properties pay less.
This is because the cap set by Ofgem limits the maximum price that can be charged for each unit of gas and electricity – but not the total bill.
The gas and electricity bills of 28 million households are affected, but customers in Northern Ireland are not because the sector is regulated differently there, although prices are also falling.
Energy bills are significantly lower than they were at their peak following Russia’s invasion of Ukraine, when the government intervened to limit the rise in bills.
This has led to a decline in the general rate of price increases, known as inflation.
However, the energy bill of a typical household is still around £400 higher than it was three years ago, which led to a debate on the issue during the election campaign.
In addition, households have accumulated a total debt of around £3 billion to suppliers, mainly due to pressure from high prices.
Those who have a prepaid meter, tend to top up their electricity bill in the colder, darker months and are therefore often under greater financial pressure, will be less directly affected by a drop in prices in summer.
The vast majority of households pay by direct debit and their payments are spread over the year. They should have been informed of the latest price changes by their supplier.
Experts say it’s a good idea to read meters now to ensure bill payers are being charged the correct rate.
Ofgem is currently reviewing the calculation of the price cap and is, among other things, reviewing numerous responses to a consultation on standing charges.
The latest changes in detail
The new prices for the period from July to the end of September mean:
- Gas prices are currently capped at 5.48 pence per kilowatt hour (kWh) and electricity prices are capped at 22.36 pence per kWh.
- A typical household consumes 2,700 kWh of electricity and 11,500 kWh of gas annually.
- Households with prepayment meters pay slightly less than those with direct debit. Their typical bill is £1,522.
- Those who pay their bills every three months by cash or cheque pay more. The typical bill is £1,668.
- Standby charges – a fixed daily fee that covers the cost of connecting to an electricity supply – remain unchanged at 60p per day for electricity and 31p per day for gas, although they vary by region.
How to reduce your energy consumption and your electricity bill
Experts give three tips on how to keep your energy consumption under control in the warmer months:
- If your hot water is too hot to wash your hands, then the setting is too high. Turn the boiler down.
- Control drafts by, for example, placing a black bag of crumpled paper in an unused chimney or limiting other drafts in the house.
- Limit your time in the shower to four minutes. The charity WaterAid has put together a playlist of four-minute songs to help you stick to the time
