Starting this Saturday, households across the country can expect a significant drop in their gas and electricity bills as the energy price cap undergoes a 37 percent reduction.
For an average user who pays through direct debit, the annual energy bill will decrease from £3,280 to £2,074, resulting in savings of £1,206.
Introduced by regulator Ofgem in January 2019, the legally binding price cap was implemented to alleviate the financial burden on households with variable tariffs, which tend to be pricier than fixed deals. The price cap, which governs the cost of each unit of gas and electricity consumed, as well as daily standing charges, is revised four times a year—January, April, July, and October.
Since October of last year, the energy price cap has been overshadowed by the energy price guarantee (EPG) introduced by the government. The EPG was designed to protect consumers during the winter season from skyrocketing bills as the cap surged, partially due to the conflict between Russia and Ukraine. Acting as a “cap on a cap,” the EPG limits charges per kilowatt hour (kWh) of energy used, along with daily standing charges, but does not place a cap on the overall bill.
However, with the impending 37 percent reduction in the energy price cap from July 1st, it will be 17 percent lower than the current EPG rate, making the higher EPG rate irrelevant for direct debit customers in the coming months.
For customers paying through direct debit, the average unit rates per kWh of gas will decrease from 10.31p to 7.51p, while rates per kWh of electricity will drop from 33.21p to 30.11p.
It’s important to note that the £2,074 per year calculation is an average based on typical household usage and not a maximum. Higher energy users may still have slightly higher bills.
For customers with prepayment tariffs, the rates will decrease from 10.55p per kWh of gas to 7.11p and from 32.05p per kWh of electricity to 29.06p.
The standing charges, which cover the cost of being connected to the grid, will remain unchanged.
To benefit from the lower rates, bill-payers do not need to take any action as the cap will automatically be applied.
Consumer expert Martin Lewis has advised direct debit customers to submit meter readings to avoid being charged at higher rates after the implementation of the new cap.
