The latest energy price cap has come into force, rising by 4%. This means the average bill for a two up, two down house will increase by £60 to £1,723 a year.
Energy experts Cornwall Insight are predicting a further increase to £1,999 a year next January. Meanwhile, the cost of living crisis continues, with many essential bills rising at rates above inflation.
What is the energy price cap?
The Energy Price Cap is the maximum amount energy suppliers can charge for each unit of energy, often shown as the total you would pay over a year for the ‘average’ bill. Every three months, Ofgem announces what the price cap will be, allowing you to decide between sticking with a variable rate or fixing a cheaper rate. The current price cap runs from 1 October to 31 December 2026.
Every two years, Ofgem reviews how it measures average energy use, known as ‘Typical Domestic Consumption Values (TDCV)’. The latest review found energy use has reduced by 7% for electricity and 17% for gas, dropping the average overall estimate by around £200 a year – not because energy is cheaper per unit. The new measures suggest the average ‘low’ usage (for one to two people in a flat) is around £1,208 a year. If you are paying noticeably more than that, you may want to check your meter and speak to your supplier.
Why is gas more expensive than electricity?
According to Ofgem, wholesale gas prices have increased by 28% compared to the previous quarter, with more competition for these resources. Gas is also used to generate electricity, but other resources like renewables and nuclear are available. Prices remain lower than the height of the energy crisis in 2022 when Russia invaded Ukraine, and the cap remains around the same level as during the same period last year.
Paying by direct debit gives most people around 8% off the bill. Ofgem estimates a saving on average of £143 a year for the 45% of people not using a method that gives a reduction. Around 22 million households are on fixed tariffs, but 34 million others will see bills increase. If you have already fixed your bill, check your tariff because your deal may be ending.
Finding a deal and cutting your bill
Comparison sites offer a wide range of switching deals, but they may not display every deal available. Most tariffs fall into four categories: fixing the biggest discount with exit fees or other conditions, fixing a lower discount with no exit fees, fixing just gas or electricity, or choosing a ‘discounted variable price cap’ tariff that stays a percentage under every price cap. You may also be able to bundle energy bills with other utilities for a discount.
Before committing, check the contract duration, total price, exit fees, and any deal breakers like taking out an insurance policy. Exit fees apply to many deals and range considerably in price. If the price cap drops significantly during your contract, you could have to pay to leave early. If you can’t afford your bill, don’t stop using energy – contact the firm and ask what they can do to help. The Energy Saving Trust has tips for saving cash.
Debt, bills and complaints
You can potentially switch suppliers with an energy debt, though if the debt is over 28 days old you will be asked to pay it off. Some suppliers may allow you to transfer it over, though not all do. You can ask for a payment plan if you can’t afford to pay the whole debt. Around four million smart meters aren’t sending readings correctly, so check your bill for the letter ‘E’ after your unit use, which means the bill is estimated. If your unit usage has increased but your lifestyle hasn’t, that suggests a problem.
According to Ofgem’s regulations, your energy provider should come up with a tailored plan if you meet the definition of financial difficulties. You can ask for a review of payments and debt repayments, payment breaks or reductions, more time to pay, access to hardship funds, advice on using less energy, and the option to go on the Priority Services Register – a free service for people struggling or needing support. To complain, tell the business you are making a formal complaint and ask for a response in writing. If you are still unhappy, the Energy Ombudsman can help – a free and impartial alternative to courts.
