What is the Ofgem energy price cap and how much are bills going down?

Energy bills have risen dramatically in recent years, placing a severe financial strain on many already struggling families. Fortunately, there is some relief on the horizon. Ofgem has decided to cap gas prices at 6p per kilowatt hour (kWh). Electricity will be capped at 24p per kWh¹. 

This price cap will come into effect from April and the average energy bill will drop by 12%¹. 

Understanding the energy price cap 

Ofgem is a government body, whose role is to promote a cleaner environment and protect energy consumers from unfair practices. It reviews the energy price cap every three months and sets the level based on the cost to a typical energy supplier of supplying energy to a home.  

The price cap is fixed for the next three months, limiting the amount per unit the energy companies can charge.  

A review is completed every three months to ensure the maximum price per unit is as fair as possible to consumers and suppliers. 

Average bill reduction 

Gas is currently capped at 7.42p per kWh and electricity at 28.62p per kWh¹. That means, from April, you will be paying 1.42p per kWh less for gas and 4.62p per kWh less for electricity.  

Ofgem estimates that this will save the average dual-fuel household an impressive £238 per year¹. That is close to £400 less than the corresponding period in 2023. 

Of course, these are average prices. The amount you pay will depend on how much electricity you use. Estimates suggest the average one-bedroom property will pay £1,228 a year after April, while a two to three-bedroom property will pay £1,690. Properties with four bedrooms or more will pay £2,365¹. 

Fixing your energy prices 

The latest reduction in the energy cap has got people asking whether to opt for a fixed-price energy deal. There’s hope that energy suppliers will start to offer these again as the prices have dropped in recent months.  

However, while fixing your energy prices will give you certainty and help you control your energy spend, you may lose out significantly if the prices continue to drop.  

Deciding between the two will depend on which you value most: certainty and security or the lowest possible price.  

If you do look at a fixed-price deal there are likely to be exit charges if you try to leave the deal early. These can be considerable and mitigate any savings you’ve made.  

Getting help 

Most of the benefits that were available when energy prices soared are now gone. The Warm Home Discount scheme, aimed at pensioners and those on a low income will continue to provide energy discounts. 

In addition, energy suppliers are obliged to provide affordable payment plans for anyone struggling with their energy bills. You may even be eligible for a hardship grant.  

As always, we’ll keep you updated on the latest developments and we are here to help. 

Sources 

1.    https://www.bbc.com/news/business-58090533

All the information in this article is correct as of the date of publishing. The opinions expressed in this publication are those of the authors Euxton Mortgage Market. The information provided in this article, including text, graphics and images does not, and is not intended to, substitute advice; instead, all information, content and materials available in this article are for general informational purposes only. Information in this article may not constitute the most up-to-date legal or other information.  

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.  

March 2024