Energy regulator Ofgem is set to announce the latest change to the energy price cap this week, affecting energy bills all across the country.
Currently, household energy bills are covered by the government's Energy Price Guarantee (EPG), which stands at £2,500 based on a yearly average bill. Meanwhile, Ofgem's current price cap is at £3,280 a year.
However, bills could soon drop following Ofgem's announcement on Thursday, May 25.
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To help prepare you for some potential major changes to your bills, we've broken down everything you need to know about the upcoming Ofgem announcement.
How is the price cap different to the EPG?
The Ofgem price cap was introduced in 2019 so that the energy regulator could manage energy prices and prevent customers from getting ripped off by energy providers. The cap is set every three months and is based on wholesale energy prices.
In October 2022, in response to wholesale prices soaring sending energy bills through the roof, the government introduced the EPG to help Brits out with their bills. The EPG works in the same way as the cap, placing a limit on how much energy providers could charge customers per unit of energy - but the government subsidises the difference.
That means that as long as the energy price guarantee is lower than the Ofgem price cap, Brits will pay the lower amount, with the government subsidising the rest.
For the last few months, the EPG has been set at £2,500 - so the Ofgem price cap, currently at currently £3,280 a year, has been of little significance to Brits paying their bills. But From July, the EPG is expected to rise to £3,000 and the Ofgem price cap is predicted to fall.
That's good news for households who could end up seeing much smaller bills than they are used to.
When is the Ofgem price cap announcement?
The energy regulator will announce its new price cap evaluation on Thursday, May 25. The price cap it announces will cover energy bills for July 1, 2023 up until September 30, 2023 for household billpayers.
The price cap for bills from October will be announced at the end of August.
How much are energy bills expected to fall by?
The vast majority of forecasters are predicting that energy bills are set to fall. Cornwall Insight predicts the price cap will drop to £2,053.77 a year in July - meaning prices will fall below the EPG for the first time since its introduction in October 2022.
The firm also predicts another drop following this in October to £1,975.70.
Both the Ofgem price cap and the EPG are not a maximum limit on how much you can be charged in total for the year. Instead, they use the cost of an average annual bill to place a limit on how much you can be charged per unit of gas and electricity.
That means that if you use much more energy than average, your bill will still be higher. So, households will most likely be charged more or less than the price cap figure depending on how big your household is and how much energy you use.
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