Energy costs to drop this July – but government must do more

3 mins read

Tuesday 27 June 2023

Tags: energy bills, cost of living, out of energy, energy price cap, household bills, energy price guarantee, government support, gas, electricity

Households across the UK should see their energy bills come down this summer, as the Ofgem price cap is set to fall below the government’s energy price guarantee from 1 July.

This reflects recent falls in wholesale energy prices. However, while the price cap has dropped from its winter peak, it remains well above the pre-2021 average.

The energy price cap and guarantee explained

Households in England, Scotland and Wales

Since 1 April 2023, the Ofgem price cap – the maximum amount energy companies can charge the average household – has been £3,280 per year.

The government’s energy price guarantee has been set below this, capping energy bills at £2,500 for the average household.

Ofgem announced earlier this year that its price cap will drop to £2,074 from 1 July 2023, below the government’s current level of support.

Households without a pre-payment meter will have their energy rate set at the Ofgem price cap. Households with a pre-payment meter will receive a gas unit rate discount. This will ensure they don’t pay more for their energy than direct debit customers.

The government will keep the energy price guarantee until April 2024 as a safety net in case the Ofgem price cap rises above £3,000 again.

It is important to be aware that this is not an absolute cap on your energy bills. The Ofgem price cap and government price guarantee are limits on what companies can charge for each unit of energy. Average usage at this rate won’t exceed the amounts listed above. But a household with above-average energy usage – as many disabled households are – may see their bills rise above these maximum caps.

Households in Northern Ireland

A similar energy price guarantee operates in Northern Ireland, where the energy market works differently. This, too, will end in July 2023, when wholesale energy prices fall.

The energy price guarantee will remain as a safety net until March 2024 in case wholesale energy prices rise significantly again.

Social tariffs needed to protect disabled households

Along with most of the charity sector and campaigners, including Martin Lewis, we continue to call for social tariffs for households on disability benefits.

The cross-party Public Accounts Committee recently found that the government left vulnerable households waiting too long for energy support.

Una Summerson, Head of Campaigns at Contact, says: “Families will welcome a drop in energy costs, but will still be paying more than they were a year ago. And they are more reliant on energy, so they face higher bills than the average household.

“A report last week found that the government was too slow with help towards energy costs last year. That’s why we are urging them to bring in social tariffs for households on disability benefits well in advance of the winter months.”