Despite falling prices, changes to government subsidies mean you’ll pay more.
The energy price cap is down for the first time in two and a half years, and looks to fall even more later in the year. But it’s still sky-high compared to historic bills, and with the energy price guarantee increasing in April, your bills are actually going to go up.
Here’s what you need to know about changes to the cap and freeze and how much you’ll pay.
The energy price cap vs the energy price guarantee
The energy price cap is a limit set every three months that restricts how much an energy company can charge customers. Rather than capping bills, it’s actually a cap on the price per unit of energy.
Initially this cap was more expensive than fixed rates, then the energy crisis flipped that. But rising rates mean that even the capped prices are astronomical compared to prices from a few years ago.
However, in October 2022 a couple of government subsidies came along which meant no one was actually paying the cap. First, is a £400 discount added to all gas and electricity accounts, saving everyone £67 a month for six months, with the last payment coming in March.
Combined with this a lower price limit called the Energy Price Guarantee (EPG). The idea is that the government pays the difference between the two rates if the EPG is lower than the price cap.
At the moment the EPG is less than the cap, so we’re paying energy firms that rate, and also getting with the £400 discount on top. Together this averages out at £2,100 a year for a household with typical use. But that’s about to change.
How much is the energy price cap?
The latest announcement (in late February 2023) is for a decrease to the price cap from 1 April until 31 June 2023.
The new cap for a household with average use is £3,280 a year. That’s down by almost £1,000 from the cap that’s run from the start of the year.
How much is the Energy Price Guarantee?
The EPG will increase from £2,500 a year (based on average use) to £3,000 a year. In reality, with the £400 bill support ending, that’s actually a £900 a year increase. That’s about 43% more.
The actual prices per unit and standing charges will depend on where you live and the energy company that supplies you – and those figures haven’t been released yet.
How much will you pay?
Since the EPG is lower than the new price cap, that’s the figure which will be used to calculate the most you can be charged on energy usage. So you’re looking at £3,000 a year, or £250 a month for the next three months.
This is far and away the most you’ll ever have been charged for your gas and electricity.
As we’re only looking at this change for April, June and May it means on average the total extra you’ll pay in this period will be £225, or £75 extra each month.
Remember, these price cap figures are based on average use. If you use more than this average you’ll pay more, if you use less you’ll pay less. Plus, don’t forget it can vary regionally so you’ll need to check where you live to see exactly what it’ll be for you.
It also doesn’t take into account any standing charge change, or if you’ve got an accurate direct debit set up. And of course, energy usage will be lower in the spring than it is right now, so dividing the annual total by 12 won’t really add up.
If you want to get a rough quick idea, you can of course add 43% to what you pay at the moment. But you’ll get a sense.
If you want something a little more accurate, Money Saving Expert has a handy calculator to estimate what your direct debit should be. You’ll need figures showing your historical energy use, which can be found on your latest bill.
What happens next?
The EPG is fixed at the £3,000 average a year for the next 18 months – until October 2024. But the latest predictions from analysts show that wholesale prices (which correlate to the price cap) will be falling further as the year goes on.
In fact, it looks like the price cap could drop to £2,100 a year on average from June until the end of the year. If that was to happen, our bills would reflect this lower rate rather than the £3,000 EPG level.
How has the price cap changed?
As you can see from this table, the really big changes have happened since October 2021. Before this the average direct debit was under £100.
But the latest change is the first decrease since October 2020, albeit with the new cap still three times higher than the once set on that date.
|Date||Price cap for a typical household||Average monthly direct debit||Change +/-|
|April to June 2023||£3,000 EPG (£3,280 price cap)||£250 (£273.33 without EPG)||+ 43% (-23.3%)|
|January to March 2023||£2,500 EPG – £400 grant (£4,279 price cap)||£175 (£356.58 without EPG)||+ 0% (20.5%)|
|October to December 2022||£2,500 EPG – £400 grant (£3,549 price cap)||£175 (£295.75 without EPG)||+ 8%(+80%)|
|April to September 2022||£1,971 price cap||£162.25||+54%|
|October 2021 to March 2022||£1,277 price cap||£106.42||+12%|
|April to September 2021||£1,138 price cap||£94.83||+9%|
|October 2020 to March 2021||£1,042 price cap||£86.83||-7.5%|
|April to September 2020||£1,126 price cap||£93.83||-4.5%|
|October 2019 to March 2020||£1,179 price cap||£98.25||-6%|
|April to September 2019||£1,254 price cap||£104.50||+10.2%|
|January to March 2019||£1,137 price cap||£94.75|
When is the next price cap change?
Until October 2022, the cap was reviewed every six months (in January and August) with new caps beginning in the April and October of each year. It’s now going to change every three months.
The price cap will next change on 1 April 2023, and we already know what this is (see above). After this, it’ll change again on 1 October 2023 until the end of the year.
Price cap announcements & changes
- 26 May 2023 announcement for 1 July to 30 September 2023 charge
- 25 August 2023 announcement for 1 October to 31 December 2023 change