Energy bills to fall by £238 for millions in April as new price cap confirmed
ENERGY bills are set to fall by £238 for millions of households this spring.
The energy regulator Ofgem has confirmed the new price cap, which comes into effect on April 1.
The cap will fall from the current rate of £1,928 to £1,690, the fresh figures show
It means the average household will see their annual bill drop by £238.
The energy regulator said it will cut the price that a supplier can charge for gas from 7.42p per kWh today to 6.04p from April 1.
The price of electricity will fall from 28.62p per kWh to 24.50p, Ofgem said.
The move will see energy prices reach their lowest level since Russia’s invasion of Ukraine in February 2022.
The invasion caused a spike in an already turbulent wholesale energy market, driving up costs for suppliers and customers.
Ofgem also announced it’s going to permanently reduce prepayment meter standing charges to make sure they never exceed the standing charges paid by direct debit customers.
It’s important to note though that the price cap is not a cap on the overall amount people will pay for their energy.
Instead, it caps the amount that they pay per kilowatt hour, or unit, of gas and electricity.
The figure is calculated based on what Ofgem thinks an average household will use.
Experts at Cornwall Insight previously predicted a typical household would see their bills drop by £293 a year.
This is calculated assuming that a typical household uses 2,900 kWh of electricity and 12,000 kWh of gas across a 12-month period.
Those who use less will pay less, and those who use more will pay more.
Be aware that the exact unit rates and standing charges you pay will vary slightly based on your supplier, where you live and how you pay for your gas and electricity costs.
Jonathan Brearley, Ofgem chief executive officer, said: “This is good news to see the price cap drop to its lowest level in more than two years – and to see energy bills for the average household drop by £690 since the peak of the crisis – but there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers.”
What else has been announced?
Mr Brearley went on to say that Ofgem is “levelising” standing charges to “end the inequity” of people with prepayment meters.
This means that people who pay for their energy using a prepayment meter will pay the same standing charge as those who pay by direct debit.
The former solution to this was removed by the Government’s temporary Energy Price Guarantee from October 2022.
It’s important to note though that any change to standing charges are still a long way off.
Ofgem said the solution must be funded by bill-payers rather than taxpayers, to maintain fairness, meaning prepayment customers will save around £49 per year while direct debit customers will pay £10 more each year.
He added: “We also need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future.
“We’ll be stepping back to look at issues surrounding debt and affordability across the market for struggling consumers, which we’ll be announcing soon.”
Ofgem has also announced it’s allowing a temporary extra payment of £28 a year, or £2.33 a month, to make sure suppliers have enough funds to support customers who are struggling.
This will be added to the bills of customers who pay by direct debit or standard credit and is to be partly offset by the end of an allowance worth £11 per year that covered debt costs related to the Covid pandemic.
Prepayment meter customers will not have to pay the extra charge, as most don’t build up the same level of debt as credit customers because they top up as they go, Ofgem said.
The regulator has also announced it is extending the ban on acquisition-only tariffs (BAT) for another 12 months.
But it says it plans to open a consultation to consider shortening this extension to just six months.
The BAT was introduced in April 2022 to remove the often risky short-term discounted tariffs intended to attract customers from other suppliers.
The price cap is adjusted every three months to reflect changes in underlying costs, as well as inflation, and only impacts UK households on default or variable tariffs.
This still accounts for roughly 29million customers, according to Ofgem.
The fall in prices in the spring comes as a result of a mild winter and high levels of gas storage in Europe.
But Cornwall Insight is forecasting that the cap will continue to decline on July 1, with a small rise in October.
Although the price per unit of energy is falling, charities have warned that many are still struggling to pay their bills.
National Energy Action (NEA) says that despite the drop households are still paying around £400 more than they were in October 2021.
Chief executive of NEA, Adam Scorer, said: “This is, of course, good news – any fall in energy bills is welcome.
“However, the drop coming in April still leaves bills significantly higher than they were before the energy crisis began. For two and a half years, household budgets have been stretched beyond breaking point by high energy bills.”
Mr Scorer has called for a social tariff to provide “permanent, deep” protection for low-income households.
He also said long-term, significant investment in energy efficiency is needed to make sure households are “resilient” against energy crises.
How do I calculate my bill?
Below we reveal how you can calculate your own energy bill.
To calculate how much you pay on your current fix, you will need to find out both your unit rate for gas and electricity and the standing charge for each fuel type.
The unit rate will usually be shown on your bill in p/kWh.
The standing charge is a daily charge that is paid 365 days of the year – irrespective of whether or not you use any gas or electricity.
You will then need to note down your own annual energy usage from a previous bill.
Once you have these details you can work out your gas and electricity costs separately.
Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type – this will give you your usage costs.
You’ll then need to multiply each standing charge by 365 and add this figure to the totals for your usage – this will then give you your annual costs.
Divide this figure by 12 and you’ll be able to work out how much you should expect to pay each month from April 1.
We’ve listed eight steps to take now to save on your energy bills.
1. Take a meter reading
Energy suppliers usually require you to take regular meter readings from your gas and electricity meter to work out how much they should charge you.
Customers who don’t do this are billed on estimated usage and will likely pay more.
So if you don’t have a smart meter, ensure that you regularly submit meter readings to your supplier.
Those with smart meters don’t need to send a manual reading because they’re sent to suppliers automatically.
Submitting a meter reading just before the rates change will ensure you’re charged the correct amount for the energy you’ve used.
We’ve previously explained how to take a reading from different types of electricity and gas meters.
2. Check your direct debit
If you pay your energy bill by direct debit, this monthly amount should be “fair and reasonable”.
If you don’t think it is, you should complain directly to your supplier in the first instance.
If you’re not happy with the outcome you can take it to the independent Energy Ombudsman to dispute, but there are a few steps before you get to that stage.
Your supplier must clearly explain why it’s chosen that amount for your direct debit.
If you’ve got credit on your account, you have every right to get it back – although some experts recommend keeping it there through the summer, so your bills don’t go up in the winter when you use more energy.
Your supplier must refund you or explain exactly why not otherwise and the regulator, Ofgem, can fine suppliers if they don’t.
If you are disputing a bill, taking a meter reading is a must.
If it’s lower than your estimate, you can ask your provider to lower your monthly direct debit to a more suitable amount.
But beware so you don’t end up in debt later on with a bigger catch-up bill at the end of the year from underpayments racking up.
If you don’t have success in negotiating a lower payment then you can put in a complaint to the Energy Ombudsman.
3. Check for any new energy deals
There are currently fixed deals on offer that are priced close to or slightly higher than standard variable tariffs, but they offer peace of mind that your rates will not change for 12 months.
But you could end up being stuck paying more if prices fall in future so it’s important to assess the real value of these offers.
Run a comparison at Uswitch.com to see personalised options based on your usage and region.
4. Check if you qualify for support
Households should check whether they qualify for energy support schemes or grants.
The government runs the Warm Home Discount scheme, which provides £150 in energy credit to help with bills during the winter and has recently introduced the Great British Insulation Scheme.
Councils also offer the Household Support Fund.
Many suppliers have customer support funds offering home insulation, energy-efficient white goods and cash grants.
Here’s a list of schemes open right now:
- British Gas Energy Trust Individuals and Family Fund
- British Gas Energy Trust
- EDF Customer Support Fund
- E.ON and E.ON Next Grants
- Octopus Energy Assist Fund
- OVO Energy
- Scottish Power Hardship Fund
5. Change your thermostat and boiler settings.
Check the temperature on your thermostat and adjust it if required.
The World Health Organisation suggests most healthy people should heat their homes to 18 degrees Celsius.
Reducing the flow rate on combination boilers to around 60 degrees Celsius can cut heating bills, and you won’t notice the difference.
It should save you around £112 per year, depending on the type of boiler you have.
6. Change your radiator settings.
Get ahead of the first cold spell by checking if your radiators are up to scratch.
Bleeding your radiators will prevent cold spots, and you may want to consider turning radiator valves down – or off – in the rooms you use less often.
The average household can also save up to £75 every year if they have thermostatic radiator valves fitted on all their radiators, according to British Gas.
Valves can be picked up for less than £10 and they’re easy to replace yourself if some of yours are not working.
We’ve previously explained what the numbers on these valves mean and how to adjust them for optimum efficiency.
It’s also important to keep your radiators free from obstructions, like furniture, for maximum heat.
7. Change the way you use your appliances.
Tracking your usage may help you see how changing some habits can make a difference in your home.
Whether that’s setting your wash cycle at a lower temperature or eco mode, ditching the tumble dryer, or running the dishwasher only with a full load, small changes may have a big impact on your next meter reading.
For example, Which? says that washing clothes at 30°C is generally fine for clothes that aren’t dirty – this could cut energy use by 38% on average compared to a 40°C wash.
And a 20°C wash will use 62% less energy.
Here are some ways to cut dishwasher costs too.
8. Check for draughts
Draught-proofing is a quick and cost-effective way to prevent heat escaping, which could save you around £50 a year.
Fitting door seals between doors and frames, attaching brushes under draughty external doors and using chimney balloons all keep the heat in.
Thermal and lined curtains also prevent heat loss.
Check out seven ways you can instantly draught-proof your house this winter.
Meanwhile, we reveal exactly what the energy price cap is.
Plus, households will see their council tax soar in weeks – but there are several ways you can get your bills discounted or wiped.
Do you have a money problem that needs sorting? Get in touch by emailing money@the-sun.co.uk.
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