The energy price cap will rise to an annual average of £1,717 in October.
Ofgem, the industry regulator, 10% increase Rising wholesale gas prices were the main culprit, prompting ratepayers to “compare” fixed-rate deals.
Money Latest:
WARNING: There will be an additional £2,500 charge added to the ‘same day’ stamp duty.
However, the recent increase (which means households paying by direct debit will have to pay £12 more each month) cap It will remain around £500 higher than the average annual bill levels previously seen. Russian invasion of Ukraine.
But what is the energy price cap? What is the real cost to your household? And why does it matter? Here’s what you need to know.
What is the energy price cap?
Energy price caps limit the daily base rate that electric power companies can charge customers and the per-kilowatt-hour rate for gas and electricity that customers use.
The regulator, Ofgem, publishes the caps every quarter, estimating how much the average household will pay in a year at the new unit price.
These figures assume 2.4 people per household, consuming 2,700 kWh of electricity and 11,500 kWh of gas.
Photo: iStock
What is the real cost of an energy price cap?
It depends on what your actual annual cost per customer is. energy You use. If you use more gas and electricity than the £1,717 purchase, you will pay more.
Using annual figures is a very imperfect basis for creating a medium-term household budget, as prices have fluctuated significantly between quarterly releases over the past four years.
In reality, the limitations are as follows:
• Per unit of electricity: 24.5p per kWh (previously 22.36p)
• Per unit of gas: 6.24p per kWh (previously 5.48p)
• Electricity usage fee: 60.99p (previously 60.12p)
• Gas filling fee: 31.66p (previously 31.41p)
Ofgem’s price caps only apply to residents in England, Scotland and Wales who use standard variable or basic rates.
This is true whether most households pay their bills by direct debit or by prepaid meter.
This policy does not apply to the small number of people who are on fixed-rate plans.
For a more accessible video player, please use the Chrome browser.
Why is an energy price cap important?
The energy price cap, first introduced in 2019, limits the unit price for gas and electricity that suppliers can charge to protect consumers.
This action was primarily in response to: Competition and Markets Authority Investigation Results It has been revealed that customers who continue to use suppliers who have increased their prices in 2018 are paying a “£4 billion loyalty penalty”.
Originally, Ofgem reviewed it every two years, but the regulator started by: Quarterly Price Cap Update August 2022 Ensure stability in energy markets and reduce the risk of bankruptcy of energy companies.
For a more accessible video player, please use the Chrome browser.
How have energy price caps changed over time?
Since the price caps were introduced, prices have fluctuated significantly in response to Russia’s war in Ukraine, the coronavirus pandemic, and record inflation.
When it was introduced in January 2019, the price cap was £1,137. It has remained roughly at that figure until 2022.
The energy price cap rose to £1,971 between April and September that year, up 54% on the previous period, before hitting a record high when Ofgem began updating the cap on a quarterly basis.
From October to December 2022 the cap was £3,549 and from January to March 2023 The highest ever cap is £4,279.
Read more on Sky News:
Pound hits strongest against dollar since 2022
Germain Jenas fired on live broadcast
Follow Sky News for the latest news from the UK and around the world.
Tap here
In response, the Conservative government introduced an energy price guarantee that capped electricity bills at £2,500, rising to £3,000 in July 2023.
In July of that year the limit was lowered to £2,074, and has not exceeded £2,000 since.
