The Ofgem price cap sets a limit on what you can be charged for unit rates and standing charges
Millions of households will see their energy bills spike from next week.
The Ofgem price cap is set to rise by around 13% on average from July 1. The increase is down to higher wholesale costs, which have been driven by the conflict in the Middle East.
As the hike is coming over the summer period, when we use less energy, households will be spared much of the impact for now – but experts have warning of another bill hike this winter.
It isn’t too late to take action now if you’re worried about rising costs.
What is the price cap?
Despite what its name suggests, the price cap does not limit how much you can pay for gas and electricity.
It sets a limit on what you can be charged for unit rates and standing charges – so use more energy, and you will pay more.
The headline price cap figure represents what Ofgem believes the average household can expect to pay.
However, the regulator is updating its methodology to reflect that people are now using less energy as a way to save money.
Based on its current estimates of usage, the price cap will increase from £1,641 to £1,862 a year for the typical home paying by direct debit.
But under its new lower estimates, the current April price cap in place now would be £1,477 and the new July price cap will be £1,663 a year.
Again, this represents what the average household pays for energy – your bill can be more or less than this.
Energy analysts at Cornwall Insight currently predict the price cap could rise to £1,899 (£1,709 under the new estimates) this October.
You are covered by the price cap if you are on a variable energy tariff, so if you are not fixed into a deal.
Do a meter reading
It is a good idea to take a meter reading before the price cap changes, so you are not charged at higher rates for energy used before the price cap changed.
If you have a smart meter, then you should not need to send a meter reading, as this should send regular readings to your supplier for you.
Consider fixing your energy tariff
Uswitch says there are still a number of fixed tariffs that undercut the July price cap. A fixed energy deal locks the price you pay for unit rates and standing charges for a set period of time.
Ben Gallizzi, energy expert at Uswitch.com, said: “There are currently 27 fixed deals available that are cheaper than July’s price cap, with average savings of up to £285, so act now to save yourself money.
“It’s important to run a quick comparison to see options tailored to your personal energy usage. The price cap is going up, but your bills don’t have to.”
Other options to consider include tracker tariffs, which have rates that change based on wholesale energy prices, so they update when market rate goes up or down.
Start getting your home ready for winter
If energy prices do remain higher this winter, then it could be a good idea to start getting your home in check now.
For example, block up any draughts by sealing gaps around doors, windows, and floors, to stop cold outdoor air from entering and warm indoor air from escaping.
Adding radiator reflector panels and switching to LED bulbs can also help save you money. It is also a good idea to get your boiler serviced in the summer or early autumn to avoid the winter rush when heating engineers are busiest with emergency breakdowns.
Get ready for winter payments
There are several extra payments due this winter, so make sure you are aware of all the help that you are entitled to.
For example, Winter Fuel Payments are worth up to £300 and are paid to state pensioners. If you earn over £35,000, you’ll still be sent the payment, but you’ll have to pay it back through the tax system.
Or you may be eligible for £150 off your electricity bill through the Warm Home Discount scheme.
Ask for help
If you’re worried about falling behind on your energy bill, contact your supplier as soon as possible – ideally before you miss a payment.
You should be offered a payment plan, payment breaks or affordable debt repayments. If you’re a vulnerable customer, you may be able to sign up to the Priority Services Register for advance notice of planned power cuts, support in an emergency and help with reading your meter.
