The Ofgem energy price cap has been steadily falling and is currently set at £1,568 a year for the typical dual fuel household paying by direct debit – but will it rise again this winter?
Energy prices are set to rise again this winter in another cost of living blow for millions of families.
The Ofgem energy price cap has been steadily falling and is currently set at £1,568 a year for the typical dual-fuel household paying by direct debit. But the price cap doesn’t actually set a limit on how much you will pay for energy – instead, it caps the unit rates for gas and electricity. This means your total bill is still very much dependent on how much energy you’re using.
The headline price cap rate is used to illustrate what someone with typical energy usage can expect to pay. Ofgem assumes the average household uses 2,700 kilowatt hours of electricity and 11,500 kilowatts of gas. The price cap also sets a limit on standing charges, which is what you pay to be connected to the grid.
You should keep in mind there are different rates for prepayment customers and those who pay on receipt of their bill. The prepayment price cap is set at £1,522 a year, and £1,668 for other payment methods. There are regional differences that can affect your energy bill as well.
Will energy bills rise again this year?
Energy analysts at Cornwall Insight currently expect the Ofgem price cap to rise to £1,723 a year from October 1 – but we won’t know for sure how much the energy bills could rise by until August 23, which is when Ofgem is set to make its next price cap announcement. This will be for its October 1 to December 31 price cap.
It is worth noting that we’ve still got a few days to go until the assessment period which dictates the October price cap is finished, so Cornwall Insight will issue an updated price cap prediction once this assessment period has passed. Cornwall Insight is currently predicting energy bills will stay the same for the January price cap, which will last until March 31 next year. However, the January price cap prediction is less nailed on, as there is still a few months to go before this gets confirmed.
How does Ofgem calculate its price cap?
Ofgem uses lots of different factors to decide its price cap – the largest being the cost of wholesale energy. Other elements include things such as the cost of maintaining pipes and wires that carry gas and electricity, network and operating costs.
It also looks at VAT, payment method allowances and profits for the energy supplier. The assessment period for wholesale energy prices for the October price cap is May 17, 2023, to August 16, 2024.
