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Ofgem price cap decreases by £1,000

Energy regulator Ofgem have announced today that they will be lowering the energy price cap by £1,000 per year (from £4,279 to £3,280).

This at a first look seems like good news for homeowners worried about their energy bills, but how much of a difference will this change make?

In this blog, we are looking at who Ofgem are, their latest announcement and how your energy bills could be affected.

In this section (Ofgem price cap decrease of £1,000 announced):

Ofgem are the department that are responsible for regulating energy prices in the UK. They place restrictions on energy suppliers, to ensure no one supplier can charge a far higher price than another. The name Ofgem is a shortened version of the Office of Gas and Electricity Markets.

They regularly review and change their restrictions every 3 months with the limit placed referred to as the ‘energy price cap’. The Energy Price cap is a limitation on the amount an energy company can charge for energy and gas.

If you are on a default energy tariff (you will usually be if you have not recently reviewed or changed your supplier), the maximum amount you can be charged for the energy you use every hour will be set by Ofgem.

Will the lower Ofgem energy price cap mean lower energy bills?

It would make sense for a lower maximum price cap to equal lower energy bills, but it is still possible your bills could stay the same or even increase.

This is because UK households are currently benefitting from the government Energy Price Guarantee. This is a scheme developed by the government to keep energy bills for standard usage capped at £2,500 a year (you could pay more than this if you use more energy). They would repay the energy suppliers the difference in lost profits.

From April onwards, the £2,500 limit is set to increase to £3,000 meaning you will likely end up with a higher energy bill after this.

What does the Ofgem announcement mean for me and my home?

The Ofgem price cap was previously set as £4,279 between January to March 2023. This will now drop to £3,280 from April to June 2023 (the cap is reviewed and adjusted every 3 months).

This applies to those paying their energy bills via direct debit:

  • If you pay cash or by cheque, your price cap will drop from £4,533 to £3,482
  • If you pay using a prepayment meter, your price cap will drop from £4,358 to £3,325

It is generally good news that the price cap is being lowered as this indicates the price of energy going down moving forwards. The wholesale prices of fuel have dropped recently, with energy customers likely to benefit from this over the coming months.

Is the Energy Price Guaranteed ending?

The government’s Energy Price guarantee was originally meant to end in 2020 but has been extended to run until the end of March 2024. The amount of support it offers will be reduced though from April 1st onwards.

Advice for saving on your monthly bills

It is likely that a lot of people in the UK will worry about not only paying their energy bills, but also their other monthly expenses due to the rising cost of living crisis.

There are a few changes you can make that could make a difference to your energy and help you to manage your monthly budget:

  • Consider getting a smart meter to track and lower your energy use
  • Turn off radiators in rooms you aren’t using
  • Lower your boiler flow temperature
  • Wash clothes at lower temperatures and only use the tumble dryer when necessary

It can be a good idea to review other large monthly expenses, such as your mortgage. A mortgage will usually be the biggest monthly cost for most people in the UK.

Did you know that you stand to save over £2,200 per month by remortgaging your home? Switching from a variable rate to a fixed rate for example, could help you save significantly on your monthly repayments if interest rates were to rise again.

Our team of expert mortgage brokers can help you assess your mortgage compared to other mortgages available on the market. Will ensure you have the best possible mortgage in place, and can help you switch your mortgage to a new lender or deal easily and hassle free.

Call us for a FREE mortgage review at 0330 118 8188 or get a mortgage quote using our online form.

Resources

Citizen’s Advice – Getting extra support from your energy supplier

Citizen’s Advice – Your energy supply

Gov.uk – Energy Price Guarantee

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