Around three million households could save £138 on their energy bills by changing the way they pay, according to Ofgem. The energy regulator highlighted the potential savings as it announced that the price cap will rise by 4 per cent from October 1.
Standard credit payment difference
Ofgem said around three million households currently pay for their gas and electricity by standard credit, which typically means paying for energy after receiving a bill rather than through an automatic Direct Debit.
Under the new price cap, a typical dual-fuel household paying by standard credit will face annualised costs of £1,861 from October 1 to December 31. That compares with £1,723 for a typical household paying by Direct Debit - a difference of £138.
Potential savings from switching
Ofgem said households paying by standard credit may therefore be able to save money by moving to a cheaper payment method, such as Direct Debit or smart prepayment.
The regulator's consumer guidance states: “You may also be able to save money by switching from standard credit to Direct Debit or smart prepayment.
“Currently, three million households pay by standard credit. These households could be making savings of around £138 just by moving to cheaper payment method.”
The figures are based on Ofgem's Typical Domestic Consumption Values and the actual amount an individual household pays will depend on how much gas and electricity it uses.
Price cap changes from October
The price cap for a typical dual-fuel household paying by Direct Debit will rise from £1,663 to £1,723 from October - an increase of around £60 on an annualised basis.
Standard credit customers will see the corresponding figure rise from £1,796 to £1,861, while the figure for households using prepayment meters will increase from £1,620 to £1,678.
The price cap does not set a maximum amount that a household can pay for energy. Instead, it limits the unit rates and standing charges suppliers can charge customers on default tariffs, meaning the amount someone actually pays will depend on their energy consumption.
The new cap will apply from October 1 until December 31. Ofgem said the latest increase has been driven by higher wholesale gas prices, with ongoing conflict in the Middle East contributing to increases in wholesale energy costs. Wholesale costs have risen by 11 per cent and will account for 47 per cent of the Direct Debit price cap from October, compared with 44 per cent during the current quarter.
Who will be affected by the new price cap?
The increase does not affect everyone. Ofgem said 35 per cent of households - around 11 million - are currently on fixed tariffs and will therefore not be affected by the four per cent price cap increase.
Households predominantly using electricity will also see a considerably smaller increase. Ofgem said customers who mainly use electricity, including those on Economy 7 tariffs, will see bills rise by around one per cent, largely because the Government is cutting VAT on electricity from five per cent to zero between October 1, 2026 and March 31, 2027. Gas bills, meanwhile, are rising by around eight per cent.
The electricity VAT cut is expected to save households around £45 a year and will also apply to customers on fixed energy deals.
Check whether changing how you pay could save money
Households paying by standard credit who are considering changing payment methods should contact their energy supplier to find out what options are available and how much they could save based on their tariff and energy use.
Paying by Direct Debit generally allows suppliers to spread expected annual energy costs across regular payments, although customers should continue checking bills and meter readings to ensure payments reflect their consumption.
Ofgem also advises anyone struggling to afford their energy bills to contact their supplier as early as possible. Suppliers are required to offer support to customers experiencing payment difficulties and can discuss available help, alternative payment arrangements and whether another tariff or payment method may be suitable.
