The energy price cap, administered by Ofgem, applies to domestic properties in England, Wales and Scotland and the next energy price cap at £3,549, announced on 26th August, is due to take effect on 1st October – unless as expected new PM Liz Truss freezes the cap this week.
However, regardless of the action that the government take this week and whatever the price cap becomes, this does not mean you will pay no more than the cap no matter how much energy you use so where do Ofgem get the figure from?
The October price cap of £3,549 total is based on an average 2-3 bedroom property household with average energy consumption of:
- 12,000 kilowatt hours (kWh) of gas
- 2,900 kWh of electricity
So if your household uses more than the 12,000 kwh of gas and 2,900 kwh of electricity the cap becomes irrelevant.
The price cap actually relates to the cost (£) per kWh that energy companies can charge, very similar to how we all understand the cost of petrol at the pumps (so why don’t they use this same model??) and is then multiplied by the average household to give a headline figure.
If you look at your latest energy bill, it will show you have many kWh you are using. Remember, you also pay a standing charge for gas and a standing charge for electricity. This is a fixed amount per day, regardless of how much energy you use – even if you don’t use any!
For electricity, the average unit rate per kilowatt hour (kWh) at the moment is 28.3p but under the October cap it will become 51.8p. The electricity standing charge will go up from 45.3p a day to 46.5p.
For gas, the unit rate per kWh is 7.4p under today’s cap but will rise to 14.8p in October, with the daily standing charge moving from 27.2p to 28.5p.
So to save money you need to use less energy in your home, we have seen lots comments with people assuming they can use as much energy as they want and they won’t be charged more than the price cap, this is not true.
Use less electricity and you will have lower bills, it’s as simple as that.
Here are the figures you should be focusing on (although you should check directly with your supplier to confirm your actual charge as they vary):
Price Cap 1st April – 30th September 2022
£0.283 / kWh Electricity
Example: Run a 1.6kW kettle for 1 hour across the week and it would cost £0.45
New Price Cap 1st October – 31st December 2022
£0.518/ kWh Electricity
Example: Run a 1.6kW kettle for 1 hour across the week and it would cost £0.83
Remember if Liz Truss caps energy bills at £2,500 tomorrow as expected, the actual numbers you want to look at to see how your bills will change is the new cap per unit of electricity/gas your supplier can charge and not the headline rate
