Households are finally seeing a fall in their energy bills for the first time in two years after changes to the energy price cap. The price cap, which sets how much the typical household pays for their gas and electric, fell to £2,074 on Saturday, July 1.
The new figure, which applies for three months until the next price cap announcement, puts it below the government's energy price guarantee of £2,500 (which is now £3,000) and means a reduction in the typical energy bill for the first time in two years after years of increases. However, you should be aware that the price cap only applies to a typical bill. If you use more energy, you will still pay more and this cap does not apply as a blanket rule to all homes.
But how long are the reductions going to last? Will prices go down even more, and what do things look like for the rest of the year? Here is everything you need to know about how the energy price cap might look for the rest of 2023 and beyond. To get all the latest money-saving news straight to your inbox twice a week sign up here.
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What determines how much energy bills are?
Most households are currently on a standard tariff which is dictated by the price cap, which limits how much you can be charged per unit of gas or electricity as well as a cap on the daily standing charge. Standing charges are a daily fee for gas and electricity customers and are added to your bill regardless of how much energy you use. These are based largely on wholesale energy prices (those that suppliers buy the energy for) and apply only to providers' standard and default tariffs.
It is therefore better to think of the price cap as a cap on the rate you pay for energy, rather than a cap on the overall amount you pay each month. These are the current direct debit standing charges and unit rates and how they have changed this month, according to MoneySavingExpert:
Gas
Unit rate: 7.51p per kilowatt hour (kWh) (down from 10.31p per kWh in April-June)
Standing charge: 29.11p per day (no change)
Electricity
Unit rate: 30.11p per kWh (down from 33.21p per kWh in April-June)
Standing charge: 52.97p per day (no change)
It is also important to note that monthly bills do not reflect today's prices, but rather the wholesale cost from when the supplier first paid for the energy. So even if wholesale prices drop, as has been happening, there is generally a lag between this and when those cheaper rates are passed on to the customer.
Will the price cap continue to go down and will bills go back to what they were before?
Although the price cap has fallen hugely - its current rate of £2,074 is 37% lower than the cap between April and June, and 17% below the government's £2,500 price guarantee during that period - but long-term predictions are hard. Consultancy firm Cornwall Insight, which makes predictions on the cap, says it expects it to be £1,975.70 for the October-December period, a further drop.
In January 2024, it is expected to increase slightly to £2,044.96, just below what it is now. However, the company has said this is the best it can say for now, meaning the price cap is still significantly higher than it was a few years ago. To put that in perspective, in January 2019, when it was first introduced, the price cap was £1,137. In August 2021, less than two years ago, it was only £1,277. So while the latest drop is certainly good news, the average household is still paying much more than they were in the past.
Here is how standing charges and unit rates are expected to look in the coming year, according to MoneySavingExpert:
October-December 2023:
Gas
Unit rate: 6.56p per kWh
Standing charge: 29p per day
Electricity:
Unit rate: 27.52p per kWh
Standing charge: 50p per day
January-March 2024:
Gas
Unit rate: 6.95p per kWh
Standing charge: 29p per day
Electricity
Unit rate: 29.93p per kWh
Standing charge: 50p per day
