Energy price cap latest: Britons warned they won't save money this winter; people in credit advised to call energy provider (2023)

Key points
  • New energy price cap set at £2,074 from July
  • What should you do now?
  • Bill payers warned they won't save money this winter
  • Cost of living crisis is starting to abate - so why are economists not happy and what could happen next? | Ed Conway
  • Another interest rate rise now 'firmly on table'
  • Who's making money from rising food prices?
  • Your dilemmas:I am paying my dad's mortgage, how do I get added on formally?
  • Budgeting Mum: Saving for your children | Do food subscriptions save you money?| Holiday spending money| Best broadband deals


Where are gas prices now?

We know the energy price cap reduction is down largely to falling wholesale gas prices.

This chart shows the price of wholesale gas in the UK has fallen from record highs, but remains above pre-crisis levels


What could be done to bring bills down to previous levels?

By Paul Kelso, business correspondent

There are several options that might bring household bills down but none that avoid someone having to meet the real cost of energy.

Ofgem supports the introduction of a "social tariff" that would offer a reduced rate to the least well-off households.

The regulator is already talking to the water industry and local authorities about identifying households that struggle with paying for basic utilities and ministers have made encouraging noises, but it would have to be underwritten by the taxpayer, or by an additional charge on other bill payers.

There are other technical changes that could remove some cost.

So-called "green levies" applied to electricity costs could be switched to gas, more accurately reflecting the environmental impact of generation, but the taxpayer would have to fill the gap.

Ultimately elevated energy prices are the price ofremoving Russian oil and gas from our energy mix, a hole we cannot yet fill from the growing renewables sector and cost of war that we may have to get used to.

Read more of Kelso's thoughts on today's price cap news here...

(Video) Energy Price Cap Frozen (but it's still more than what you pay now)


Millions of households trapped in fuel poverty

Millions of households will still be trapped in fuel poverty despite the energy price cap reduction, a charity has warned.

In case you're just joining us, the cap will be lowered from the current £3,280 per year to £2,074 as of 1 July.

But for National Energy Action, the decrease does not go far enough and prices remain "more than two-thirds higher than the start of the energy crisis" with "two million more households trapped in fuel poverty."

Below it demonstrates some of the rises we have seen since October 2021...

"More than two and a half million low income and vulnerable households are no longer receiving any government support for unaffordable bills," says its chief executive Adam Scorer.

"For them, the energy crisis is far from over."


Is there any extra support available if you're struggling to pay?

The £400 discount which all households in England, Wales and Scotland received to offset soaring winter bills has ended.

Only those in receipt of means-tested benefits, pensioners and those with disabilities are currently set to receive further help with their energy bills, amounting to £900, £300 and £150 respectively.


(Video) Martin Lewis: Energy price cap UP 80% on 1 Oct adding £1,000s to bill

This is how the price cap has changed since 2018

Ofgem's reduction has significantly decreased the energy price cap from its April level, but if you look at the chart below you can see it's still a lot higher than before the pandemic...


Century-old homes are more boiler efficient

Century-old homes are more efficient than those built in the last decade, a boiler study by Uswitch has found.

Homes built since 2012 scored just 5.39 out of 10 in the comparison site's survey.

That's only slightly higher than the national average - 5.

Homes built from 2003-11 are the most boiler efficient, scoring 8.36/10.

Mid- and end-terrace houses, which you might expect to be different given the number of external walls, draw with 5/10 for overall boiler efficiency.

Perhaps most surprising of all, homes built more than a century ago, between 1900 and 1929, have an overall boiler efficiency score of 6.16.


Tips for households following price cap reduction - from Martin Lewis

The money saving expert has welcomed the energy price cap reduction, saying the news will be a "relief for many" but warning most won't save money this winter.

Martin Lewis explained what the new cap would mean for the average household...

"Bills will drop by an average 17%, meaning for every £100 per month people pay today, they will typically be paying £83 per month from July.

"Apart from for those with high use, the drop in the rates doesn't make up for the £66 per month state support people got until April – and most are on monthly direct debit, which means they pay the same in summer as winter."

Along with his tip for standard tariff customers, which you can read in our previous post, he also offered some advice for those on pre-payment meters.

He said rates are due to drop in July by a larger amount than direct debit, roughly 18%.

This is because it is the first time the prepayment price cap will be at the same level as the one for direct debit.

"With many non-smart, prepay electricity meters, you pay the rate on the day you top up – so customers with those should be aiming to run their credit down towards the end of June, to have as little in on 1 July when prices get cheaper," he said.

"Then top up on 1 July - even just a quid - so you're then on the new lower rates."

For all customers, Mr Lewis said it's worth doing a meter reading around 1 July to show much energy they used on the higher rate - this stops your supplier from estimating usage and potentially assuming that you've used more at the higher rate than you have.

(Video) Energy price cap: How much your bill will increase by and what help is available


Will today's reduction see the return of switching?

As we have been discussing, there are currently no fixed deals to switch to, but there is hope that today's announcement will kickstart their return.

Ofgem's chief executive appeared on Sky News this morning - and has since conducted further interviews.

Jonathan Brearley told Radio 4's Today programme that prices were starting to stabilise and he was "very hopeful that we will start to see the competitive fixed price deals re-enter the market".

"If we see that, then customers will get a better deal than the price cap," he said.

"So we have faced the biggest energy shock in our history, but things are improving."

Respected research specialist Cornwall Insight said it hoped to see the reappearance of more competitive fixed-rate energy tariffs as prices begin to stabilise, meaning it could soon be worthwhile for consumers to consider switching again.

Unlike variable tariffs, they are unaffected by the cap.

Consumer groups and regulators say that could be good news for consumers, but warn that such deals will not suit all circumstances, and anyone who locked into a fixed deal would miss out on falling variable prices.

(Video) Martin Lewis: On an energy fix – will what you pay DROP due to the new fixed rate energy guarantee?

MoneySavingExpert founder Martin Lewis's rule of thumb is - if any firm offers a fix for not much more than the price cap, for the sake of certainty it's worth considering.

He said for people on high fixed rate deals, "it is worth considering switching to a price capped standard tariff – possibly even if you need to pay exit fees".

"Though if you're coming to the end of a fix you don't pay exit fees in the last 49 days," he added.


What if you're not on a standard default tariff?

Chancellor Jeremy Hunt confirmed in the spring budget that energy costs for prepayment households would be brought in line with those who pay by direct debit.

This means the cap is the same for both forms of payment.

However, those who pay via cash, cheque or bank transfer, usually every three months, will pay significantly more.


Analysis: This is the 'new normal'

While it's good news that the price cap has come down, bills are still well above pre-COVID levels.

And anyone hoping this will change any time soon is set for disappointment.

Business correspondent Paul Kelso says today's announcement "signals a new normal of sustained high energy prices that would have been unthinkable prior to the Russian invasion of Ukraine".

He goes on: "There is little reason to think prices will continue to fall back. Energy bosses expect wholesale prices to remain stable for the rest of the year and the markets agree, with forward curves broadly level.

"That means, barring unforeseen shocks, that prices will remain at close to double the long-term average of around £1,000 that applied before the war."

(Video) UK Energy Resilience: Prices, Emissions and Supply this Winter

Read Kelso's full analysis here...


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