Understanding the upcoming changes to the Energy Price Cap

The energy price cap, set by Ofgem, is designed to protect consumers from excessive energy prices. The latest adjustment, effective from July 2024, will see a reduction in the cap. However, while the headline figures suggest relief, the nuances of standing charges have a significant financial impact on millions of UK households.

Price Reduction

The energy price cap will decrease by 7% starting on 1st July 2024, for the period July to September. This reduction translates to lower average household energy bills, which will fall from £1,690 to £1,568 per year for those paying by direct debit.

Prepay unit rates are set to be slightly lower than those for direct debit, making prepayment a viable option. However, it’s crucial to be cautious as historically, the best deals have been offered to direct debit customers​.

Impact on Households

While this decrease is a positive development, it is essential to note that energy bills are still substantially higher than pre-crisis levels. Despite the drop, many households will continue to face financial challenges. 

Standing Charges

The standing charges, which are the fixed costs customers pay for being connected to the energy grid, will remain unchanged, at approximately 60 pence per day for electricity and 30 pence per day for gas. 

This can be particularly damaging during the summer months, when central heating is off, but daily gas standing charges remain, at approximately 30 pence.  

Martin Lewis, founder of MoneySavingExpert,com, has been openly lobbying Ofgem to bring down the standing charge, and a standing charge consultation report is due this summer.

Increases are coming

Cornwall Insight, the energy research analytics and consulting company, has predicted a whopping 12% price cap rise on 1st October, for the period October to December, and remain at around this level until March 2025. 

What does this mean for millions of households?

Although the reduction in the energy price cap is welcomed, it is not a remedy for the high costs faced by many households. The overall benefit might be limited due to the persistently high standing charges and the relatively modest decrease compared to historical prices. 

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