New energy price cap

Updated 30th December 2023

The Energy Price Cap, a mechanism that regulates energy costs for the majority of households, is set to increase on January 1st, 2024.

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As per Ofgem's average usage figures for households that pay by direct debit, the Energy Price Cap will climb by 5% to £1,928 per annum on January 1st, 2024. However, the precise cost you pay will be determined by your energy usage, location, and payment method.

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The UK has witnessed a relentless surge in energy prices over the past year, leaving households grappling with the financial burden of rising bills. While some relief measures have been introduced, the overall outlook for energy costs in 2024 remains uncertain, with forecasts pointing to further increases.

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According to research from a leading energy consultancy, in October 2024 the cap could rise by up to 30%, bringing the average dual-fuel bill to around £3,300 per year.

What is the Price Cap?

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The Price Cap is a safeguard that limits the amount that energy suppliers can charge residential consumers per kWh of energy consumed and also restricts the standing charge. The Price Cap for October to December 2023 stands at £1,834 per annum for a typical household. The Price Cap for January to March 2024 will be set at £1,928 per annum for a typical household.

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Published 30th December 2022

Ofgem have released the latest energy price cap for the period 1st April to 30th June 2023.

It really is hard to get your head around the way this is all presented, Ofgem calculates the price cap and the energy price guarantee (EPG) using Typical Domestic Consumption Values (TDCVs).

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Ofgem’s typical domestic consumption for electricity for flat or small houses with 1 or 2 people would be 1,800 kWh, a house with 2-3 people around 2,900 kWh and a 4 bedroom home 4,300 kWh per year although at Jellyfish Solar we see these typical consumption values to be surprisingly low and not the ‘medium’ value it may suggest.

The energy price cap is not the highest amount you will spend on your energy, this is the maximum price that can be charged by the energy suppliers to consumers per unit of energy. So the more you use the more you will pay.

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“Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means, that on current policy, bills will rise again in April. I know that, for many households this news will be deeply concerning.”

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Quote from Ofgem CEO Jonathan Brealey

The energy price guarantee (EPG) was introduced in October 2022 by the Government to support households and provided a reduction (discount) to the energy price cap rates which the Government offsets the difference.

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Currently the price cap is £4,279 per year with the EPG discount bringing the price for a typical household down to £2,500 per year. From April 2023 the EPG is due to rise to £3,000 per year, a 20% increase, and with the £400 energy support finishing then households will be feeling the impact more.

Martin Lewis founder of www.MoneySavingExpert.com is urging Chancellor Jermey Hunt to postpone the rise which is backed by over 70 other organisations.

We will be keeping a close watch on the governments EPG rates when they are released in the next few days.

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