The energy regulator, Ofgem, has announced an increase in household energy prices. This means that people will be paying £1,928 (5% more) for a typical annual household bill from January 2024.
What will the new energy price cap mean for the UK?
Prepayment households see a decrease in their bills from October to December, but they still pay more than direct debit users. Those who pay every three months with cash, cheque, or bank transfer see an increase in their bills and pay more than direct debit users. Additionally, prepayment meter users will experience an increase in their bills in January. Here is the break down:
Prepayment households (pay-as-you-go):
- Old Calculation: Previously, between October and December, these households would typically pay £2,077 for their energy.
- New Calculation: With changes, the bill for the same period is now reduced to £1,949.
- Comparison to Direct Debit: Still, prepayment users pay £26 more than those who use direct debit for the same period.
Cash, Cheque, or Bank Transfer Payments (every three months):
- Change in January: In January, the typical annual bill for prepayment meter users will rise to £1,960.
- Old Calculation: Previously, the typical bill for these payments was £129 less than the new calculation for prepayment users.
- New Calculation: With changes, their bill is now £129 more, making it £2,058 for the period between October and December.
Prepayment Meters in January:
- Comparison to Direct Debit: These users pay £130 more annually compared to direct debit users.
What is the Ofgem’s energy price cap?
The UK’s energy regulator, Ofgem, sets a limit called the price cap on the highest amount energy suppliers can charge customers for their standard variable or default energy tariffs. Ofgem reviews and sets a level on how much an energy supplier can charge for each unit of energy, this is done every three months. The purpose of this cap is to shield consumers from paying excessively high prices for their gas and electricity.
Ofgem establishes a maximum limit on the rates that energy suppliers can charge for each unit of energy. This limit ensures that, even if energy prices increase, there is a cap on the additional amount consumers can be charged. The main goal is to protect consumers from sudden, unfair increases in their energy bills and promote fairer pricing in the energy market.
What is a typical household?
When figuring out how much a usual household pays for energy, they look at a typical customer who uses 11,500 units of gas and 2,700 units of electricity in a year. These units are called kilowatt hours (kWh) and are what the energy bill is based on.
But, not all homes are the same. The amount you pay depends on how much energy your household really uses. This can be influenced by things like the number of people in your home, the type of house you live in, and how energy-efficient it is. So, your actual bill depends on what’s happening in your specific home.
