Tag: energy regulator

More energy misery as Ofgem announces 10% price cap hike


23 August 2024 – OFGEM STATEMENT

Every 3 months we review and set a level for how much an energy supplier can charge for each unit of energy and daily standing charge, under the price cap. 

From 1 October to 31 December the price for energy for a typical household who use electricity and gas and pay by Direct Debit will go up to £149 per year. This is an increase of 10% and adds around £12 per month to an average bill.

The new cap is 6% (£117) cheaper compared to the same period last year (£1,834).

You are covered by the energy price cap if you pay for your electricity and gas by either: 

  • standard credit (payment made when you get your electricity and gas bill) 
  • Direct Debit
  • prepayment meter
  • Economy 7 (E7) meter

The actual amount you pay will depend on how much energy your household uses, where you live and the type of meter you have.  

Energy price cap rates 1 October to 31 December

Electricity rates

If you are on a standard variable tariff (default tariff) and pay for your electricity by Direct Debit, you will pay on average 24.50 pence per kilowatt hour (kWh). The daily standing charge is 60.99 pence per day. This is based on the average across England, Scotland and Wales and includes VAT.

Gas rates

If you are on a standard variable tariff (default tariff) and pay for your gas by Direct Debit, you will pay on average 6.24 pence per kilowatt hour (kWh). The daily standard charge is 31.66 pence per day. This is based on the average across England, Scotland and Wales and includes VAT.

Costs included in the energy price cap

The level of the energy price cap is made up of different costs, for example the wholesale cost of gas and electricity, costs to supply energy on the network and VAT. These costs are split within the energy price cap between the unit rate and the standing charge.

Read about typical household energy use and how the energy price cap is calculated on our Average gas and electricity use explained page. 

View and compare 1 October to 31 December and 1 July to 30 September energy price cap standing charges and unit rates by region. 

You can also get and compare all the energy price cap (default tariff) levels. 

Review of standing charges

Last year we started a review of standing charges. Our call for input had feedback from more than 30,000 customers, consumer groups, charities and others.

Today we have published an options paper on our ways to reduce standing charges for households, called ‘domestic standing charges’. Standing charges are set by your energy supplier and are also included in the energy price cap. Your supplier will charge you this cost each day, even if you do not use any energy on that day. The charge covers the cost to maintain the energy supply network, take meter readings, and support government social and environmental schemes, like the Warm Home Discount scheme. 

View Understand your electricity and gas bill

The options in the paper could reduce the standing charge by between £20 and £100 per year by transferring parts of these fixed supplier costs to the unit rate (the price paid for every unit of energy used). 

We know that if these changes are made it could affect people who cannot safely reduce the amount of energy they use. This could be because of their dependence on life-saving medical equipment or living in a low standard of housing with poor insulation.

We are asking energy suppliers to offer energy tariffs that have no or low standing charges as well as their current tariffs. This will mean that energy efficient households will be able to choose a tariff that rewards them for using less energy. It will also mean that other energy customers can also choose from more tariffs that meet their needs.

You could pay less for your energy by changing your energy tariff. Find out if you can change your tariff and how to switch energy supplier.  

The options paper also sets out long-term considerations relating to the assignment of network costs, as a part of a broader review of how electricity and gas system costs are recovered from users.  

We would like to hear your views on standing charges. The discussion closes on 20 September 2024. Read our standing charges options paper and feedback your views using our online form.

Support for people with a prepayment meter

We have also extended our initial 12-month allowance to cover increased debt costs associated with additional support credit which we expect to be in place for at least another 6 months.   Additional support credit is often issued to people at risk of being cut off from their energy supply because they cannot afford to top up their meter. This decision means that the most vulnerable consumers will continue to be supported and have an energy supply this winter.

Next energy price cap review

We review and set a level on how much an energy supplier can charge for each unit of energy including the standing charge every 3 months. The levels for the period 1 January to 31 March 2025 will be published by 25 November 2024. 

Caroline Abrahams, Charity Director at Age UK said: “Means-testing Winter Fuel Payment (WFP)  when fuel prices are rising by 10% spells disaster for pensioners on low and modest incomes or living in vulnerable circumstances due to ill health.

“It means an estimated 2 million older people in all, will face an even steeper mountain to climb in paying their energy bills and staying warm and well when the weather chills. With pensioners also losing the cost-of-living payments they’ve received over the last two years we simply cannot see how some of them will cope.

“This latest bad news about the Energy Price Cap rising quite significantly makes it even more obvious that means testing WFP with virtually no notice & with no protections to safeguard vulnerable groups was the wrong policy choice and one that is potentially hazardous for some older people.”

“There’s scarcely any time to tackle the long-term under-claiming of Pension Credit – for more than a decade a third of pensioners who are entitled to it have consistently missed out. And the million or so older people whose small incomes take them just above the line to claim are horribly exposed – no take-up campaign can help them.” 

“Means-testing WFP in these circumstances this winter is reckless and wrong. The Government must think again.”

Age UK urges any older person living on a low income or struggling with their bills to contact Age UK’s free Advice line on 0800 169 65 65 without delay to check they’re receiving all the financial support available to them.

Alternatively, people can visit www.ageuk.org.uk/money or contact their local Age UK for further information and advice.

National Energy Action has responded: Just now, @Ofgem announced that #EnergyBills will rise 9% from October. NEA Chief Executive @adam_scorer says, ‘There is still time for @Ofgem and UK government to act for those at greatest risk, but without support.’

OFGEM announces latest update to energy price cap

Energy regulator Ofgem has announced its quarterly update to the energy price cap for the period 1 April – 30 June 2023.   

From 1 April the energy price cap will be set at an annual level of £3,280 for a dual fuel household paying by direct debit based on typical consumption, a reduction of almost £1,000 from the current level, of £4,279 which reflects recent falls in wholesale energy prices. 

The £3,280 figure indicates how much consumers on their energy suppliers’ basic tariff would pay if the government’s Energy Price Guarantee (EPG) were not in place.

From 1 April, the government has set the EPG at £3,000 for the typical bill – meaning that consumers will not pay the full level of the energy price cap.

This reduction in the price cap level reflects a significant reduction in the cost of buying and providing energy for customers.  If it continues, it will mean that by the summer, prices paid by consumers will drop for the first time since the global gas crisis took hold more than 18 months ago.

The energy price cap was introduced by the government and has been in place since January 2019, and Ofgem is required to regularly review the level at which it is set. It ensures that an energy supplier can recoup its efficient costs while making sure customers do not pay a higher amount for their energy than they should. The price cap, as set out in law, does this by setting a maximum that suppliers can charge per unit of energy. 

Ofgem CEO Jonathan Brearley said: “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.

“However, today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease. If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.

“However, prices are unlikely to fall back to the level we saw before the energy crisis. Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain.

“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to. We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.

Ofgem has robust rules in place to help people in vulnerable situations, and suppliers are obliged to offer payment plans and direct customers to available support.

Bill-payers will continue to receive additional support via the EPG until the end of March 2024, as confirmed by the Chancellor on Thursday 17 November 2022. The level of this support is set by Government.     

There is no immediate action for consumers to take as a result of today’s announcement.   

Ofgem continues to protect consumers through its ongoing robust regulation of the market, taking enforcement action where necessary and providing support to those who need it the most.   

The next quarterly price cap update will be on 26 May 2023.

UK Government leaving people to prop up energy bosses’ profits, says STUC

Roz Foyer, STUC General Secretary, stated: “The energy price cap might have fallen today but the callous decisions of the UK Government means most people will be facing higher energy bills from April 1st. Thousands of people are being pushed into poverty and face choosing between a hot meal or a warm home.

“There is no justification for continuing to ask people across the UK to pay the price for energy companies billions of profit. We need to take back control of our energy system, tax these companies properly, and end the outrageous injustice of rising energy bills.”