Ofgem has announced new, lower price cap rates from July 1. The cap, measured four times a year, decides the maximum amount of money energy suppliers can charge consumers per unit of energy used.
At the last count, back on April 1, the cap was set at £3,280 per year, though no one ended up paying that because of the UK government's energy price guarantee, introduced in October 2022. At the time, the price cap was set very high and energy bills were reaching unpayable highs for many.
The guarantee capped the maximum rate for an average household at £2,500. Ofgem's new unit rates mean its energy price cap falls below the energy price guarantee - at an average of £2,074 per household per year.
Read more: What does the new energy price cap mean for you?
These figures are all a cap on unit rates - the price per kilowatt hour (kWh) - not a cap on total bills. Ofcom's price cap limits how much energy companies can charge users per kWh consumed, as well as how much customers must fork out for daily standing charges.
While the price of oil and gas may rise and fall, the cap stops energy companies passing those charges onto consumers, who only pay up to the maximum price per unit. So, while the price per unit will be lowered from July 1, if you use more energy, your bills could still be higher.
The cap also includes a limit on how much suppliers can ask for in standing charges. This is the price you pay daily, whether or not you have used any energy and pays for the pipes, wires, and people bringing energy into the home.
Energy unit price from July 1
Electricity: £0.30 per kWh
Gas: £0.08 per kWh.
Standing charges limit from July 1
Electricity: £0.53
Gas: £0.29
For the first time since the global energy crisis began 18 months ago, customers on default tariffs will finally see a drop in their bills. At its peak, the cap reached £4,279 - while current prices are significantly below where they have been in recent months, Ofgem say many families will still continue to struggle.
Ofgem chief executive Jonathan Brearley said: “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction. People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.
“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.
“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups. In particular, we will continue to work with government to look at all options.”
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