The energy price cap will fall from £2,074 to £1,923 after wholesale costs dropped, Ofgem said today – but campaigners warned bills were still unaffordable high.
Charities want an ‘urgent reboot’ of the energy market despite the regulator saying it will cut the price a supplier can charge for gas from 6.9p per kilowatt hour (kWh) today to 6.89p from October 1. Electricity will fall from 30.1p per kWh to 27.35p.
The average household bill will now end up at around £1,923 per year, according to Ofgem’s calculations. Customers on prepayment meters will pay £1,949 on average.
The cap is the per unit charge, so people using more will pay more. It is based on an estimated 2,900 units of electricity and 12,000 units of gas for the average home.
The drop in the cap for England, Wales and Scotland appears at first glance to be good news for households. Last winter the cap was de facto superseded by the Government’s Energy Price Guarantee which kept the average bill at £2,500.
But on top of that the Government was also paying about £66 per month towards each household’s energy bill. This support is not there this winter, meaning many households will be paying more every month this winter than they were last winter.
And the Resolution Foundation think tank warned that over a third of households across England, 7.2 million in total, would still face higher bills this winter than last.
Labour said today’s new cap showed the ‘Tory cost-of-living crisis is still raging for millions of people’ – while consumer group Which? said bills are ‘significantly higher than they were before the energy crisis began’, even with the drop announced today.
The charity Scope said energy still costs ‘more than double what it did two years ago and bills remain excruciatingly high’, while the Money Advice Trust lamented the ‘extremely worrying time for people who have fallen behind on their energy bills’.
And campaigners at the charity National Energy Action issued a warning that the price cap will not stop 6.3million UK households from being trapped in fuel poverty.
The average household bill will now end up at around £1,923 per year, according to Ofgem
A graph shows the costs included in the Ofgem price cap and how it has changed since 2019
Last week experts at Cornwall Insight, an energy consultancy, said they had expected gas to fall to 6.9p and electricity to just under 27p.
The Resolution Foundation think tank, which focuses on living standards, said that while the price per unit of energy is falling, this will be offset by a rise in the daily standing charge and the end of the £400 universal payments.
Jonny Marshall, senior economist at the think tank, said: ‘Falling wholesale gas prices have finally brought the energy price cap down below £2,000.
‘However, this is still over 50 per cent higher than families were used to before Russia invaded Ukraine, while the end of the £400 universal payments and rising standing charges mean that over one-in-three families across England will face higher bills this winter than last.
‘With almost three million households set to see their bills rise by over £100 – at a time when inflation is still sky high – the Government must up its game in providing longer-term support for hard-pressed families with a new social tariff for energy bills.’
Ofgem chief executive Jonathan Brearley said today: ‘It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter.’
Mr Brearley said that now that energy prices were easing, Ofgem had allowed suppliers to earn a little more money off their customers.
‘This means there should be no excuses for suppliers not to be doing all they can to support their customers this winter, and to reinforce this we’ll be introducing a consumer code of conduct which we will look to have in place by winter,’ he said.
Mr Brearley is one of many to question the effectiveness of the price cap and point towards the benefits of a so-called social tariff, which would offer cheaper gas and electricity to those most in need. Without that, experts expect that average energy bills will remain at around £2,000 for vulnerable households for years to come.
| Direct Debit | Prepayment | Standard Credit | Economy 7 (electricity only Direct Debit) | |
|---|---|---|---|---|
| July-Sept 2023 cap | £2,074 | £2,077 | £2,211 | £1,400 |
| Oct-Dec 2023 cap | £1,923 | £1,949 | £2,052 | £1,298 |
This chart shows trends in prices since 2017 for a dual fuel customer paying by prepayment. It shows the market cheapest tariff, the average standard variable tariffs (SVT) and the price cap for this payment method. The figures are calculated for a household with average energy use
Mr Brearley also said today that things are better but there is a group of customers who are going to struggle.
Speaking to ITV’s Good Morning Britain, he said: ‘We are encouraging the Government to look at a system of pricing regulation to see if there are better alternatives. And yes, we’d like to see social tariffs in the mix of the things that Government might consider. And so we’re very happy to support them on that.
‘And I go up and down the country talking to people about their energy use, and I know how tough it’s going to be for this winter. And so what I’d say to Government and to the sector is all of us need to work together. We need to play our part to protect that proportion of customers who are really, really going to struggle.
‘Yes, things are better. They are better than they were last year, on average, but as you say, there is a group of customers who are going to struggle.’
Labour’s shadow energy and net zero secretary Ed Miliband said the news demonstrated that the ‘Tory cost-of-living crisis is still raging for millions of people’.
He added: ‘Higher energy bills are unfortunately here to stay under the Conservatives – even with this fall, bills are significantly higher than they were only three years ago.
‘The problem is the Tories have learnt no lessons from this crisis. They continue to side with the oil and gas companies making record profits over hardworking British families, with their refusal to fix the gaping loopholes in the windfall tax or make the sprint we need for clean power, keeping the onshore wind ban and failing to insulate homes.’
Mr Miliband said Labour would ‘act to close loopholes and bring in a proper windfall tax on oil and gas giants to help tackle the cost-of-living crisis, alongside our plan to make Britain a clean energy superpower so we can lower bills for families and businesses’.
David Cheadle, chief operating officer at the Money Advice Trust, the charity behind National Debtline, said: ‘This is an extremely worrying time for people who have fallen behind on their energy bills, whilst grappling with high costs across the board.
‘Looking ahead to winter, many households will face impossible choices without further support.’
And Rocio Concha, Which? director of policy and advocacy, said: ‘Even with this drop in prices from October, energy bills are significantly higher than they were before the energy crisis began – meaning some households will still struggle to afford their bill.
‘If you are concerned about struggling to pay higher bills, there is help available. Speak to your energy provider about a payment plan you can afford and check to see if you qualify for any government schemes.
‘Given the volatility in the energy market over the past two years, many – including Ofgem – are now raising questions about how best to create a well-functioning, competitive market, including reforming the cap.
‘As part of these discussions, it will be crucial to consider how to protect customers who are struggling to afford their energy bills. The government urgently needs to introduce a properly targeted social tariff as soon as possible to help those struggling to make ends meet.’
Adam Scorer, chief executive of National Energy Action, said: ‘Any fall in the price cap is welcome but for 6.3 million households still in fuel poverty it will make precious little difference.
‘The price cap does not protect those who simply cannot afford the cost of keeping warm. That requires direct government intervention through bill support, social tariffs and energy efficiency.
‘For a third straight winter, vulnerable households will face stubbornly high bills and an increasing energy debt mountain. This winter there is no Price Guarantee and no £400 Energy Bills Support Scheme.
‘The absence of targeted further financial support this winter to reduce the energy bills of the most vulnerable will mean millions of unheated homes and spiralling debt.’
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: ‘Ministers had promised to consult on tariff reform to help the households most in need and who most rely on energy to keep themselves safe. Sadly, they have abandoned plans for a social tariff consultation.
‘The Government seems to be running out of enthusiasm to help people get through the energy bills crisis, and it is also now running out of time to act to keep people warm this winter.’
Citizens Advice warned this winter could be ‘as bad, if not worse, than last’ with households struggling to pay their energy bills.
Its head of energy policy Gillian Cooper said: ‘Well before the winter hits, we’re already helping record numbers of people behind on their energy bills. Today’s price cap announcement will do little to change that. Typical households are still facing sky-high energy costs, now that support schemes have come to an end.
‘Increasing numbers of people we help are in a negative budget, where they simply don’t have enough money coming in to cover even just their essential bills. The next few months will push households like these over the edge. Our data suggests it will be as bad, if not worse, than last winter.
‘Government must step in quickly with more targeted support for the households who need it most.’
Meanwhile James Taylor, executive director of strategy at disability equality charity Scope, said: ‘When turning off the power can be a matter of live and death, it’s clear our broken energy market needs an urgent reboot.
‘Energy still costs more than double what it did two years ago and bills remain excruciatingly high for disabled people.
‘Today’s price cap isn’t a limit on bills, but a cap on the cost of each unit of energy used. We know that disabled people use more energy, and the extra cost of disability stacks up.
‘Many disabled households can’t simply turn off nebulisers or go without energy to charge wheelchairs and hoists. The Government has broken its promise of delivering a social energy tariff. Creating this tariff in time for winter needs to be a political priority.’
But an energy minister said the Ofgem announcement showed the Government is delivering on its plan to halve inflation and get the economy under control.
Asked on BBC Breakfast if the annual typical household energy bill is a ‘fair and affordable price to pay’, Andrew Bowie said: ‘I think it’s incredibly heartening. Good news that the energy price cap is falling.
‘It’s down roughly £580 from its peak and so I think it shows that the Government’s delivering on its plan to halve inflation and get the economy under control. And I think people will welcome the fact that average energy bills will now be lower than at any point since early 2022.
‘So this is a positive day, we’re moving in the right direction and I think that we should welcome it.’
Asked again if he thinks a typical annual energy bill is affordable, Mr Bowie said: ‘For many people… will be looking at this worried about the cost of their energy bill, but as I said, it’s heading in the right direction.’
Mr Bowie added that the fact the standing charge has risen for gas and electricity is a ‘matter for Ofgem’.
Asked whether he could explain to people why the standing charge rising for gas and electricity is the right way to go, Mr Bowie told BBC Breakfast: ‘That’s obviously a matter for Ofgem.’
Pressed again on it, he said: ‘I think the focus today should be on the fact that the price of energy is falling, people’s average energy bills are coming down.’
Asked once more about his thoughts on the standing charge, Mr Bowie said: ‘I think what we need to focus on today is the fact that people’s average energy bills are coming down. People will be paying less now than they have been for their energy bills overall. That’s an incredibly positive thing. The standing charge as it is is a matter for Ofgem.
‘It’s something that the Government will be discussing, and indeed, the future of energy markets in the United Kingdom is something that we are reviewing. There’s a call for evidence ongoing right now. But today is a positive day. The price cap has come down. And I think that’s what we should be focusing on.’
Mr Bowie also claimed that the Government has always remained open to ‘doing what we need to do to support people in this country’.
Asked on the BBC Radio Scotland’s Good Morning Scotland programme if the Government is planning any additional help with energy bills for vulnerable households, he said: ‘Look, as I said, the Government has always remained open to doing what we need to do to support people in this country who can ill afford to pay for their energy, ill afford to heat their homes and that’s why we did step up last winter…to the level that we did.
‘And we will remain open to discussing with individuals, charities and organisations concerned about how we best do that moving forward.
‘But as I said, the most vulnerable in this country, those receiving benefits, pensioners, will, of course, receive the support that they already do. And if we need to go further, this Government is always open to discussing how we do that.’
Meanwhile the Green Party has called for a Government-backed home insulation programme in response to the Ofgem announcement.
Its co-leader Adrian Ramsay said: ‘The new price cap underlines the urgent need for a Government-backed home insulation programme targeted, in the first instance, at those most at risk of fuel poverty.
‘The Government should be announcing today funding and support for local councils to start a mass programme of cost-saving home insulation. With the right funding and determination, such a scheme could start to help people from this winter.
‘Even with a lower price cap, bills are still higher than before the energy crisis and are likely to remain high for the future. ‘
‘Figures released earlier this week suggested that almost half of all British households – 13 million homes – said they did not turn on their heating when it got cold last winter.
‘The average home could save hundreds of pounds a year with decent insulation and the Government needs to support councils to reach them as soon as possible.’
Friends of the Earth urged the Government to switch from gas to greener sources of energy.
Connor Schwartz, warm homes campaigner at the environmental organisation, said: ‘With gas prices still more than double what they were before the energy crisis and emergency Government support now a distant memory, millions of people will be dreading another winter of struggling to afford their energy bills.
‘People in the most vulnerable situations and those on lower incomes living in cold, heat-leaking homes have months of hardship ahead, unless the Government acts now to end our reliance on expensive, polluting gas and makes our energy system fairer and greener.
‘It’s a disgrace that the oil and gas companies fuelling the energy and climate crises are celebrating record profits while some of that money could be used to support the hardest-hit communities and cut harmful emissions by funding crucial energy efficiency upgrades for millions of homes.
‘With winter fast-approaching, the best time to start rapidly rolling out street-by-street insulation was yesterday, the next best time is now.’