There’s a 5% rise on the current energy rates coming in January, meaning the average home will pay £160 each month.
by Zoe Stabler, Senior Writer
After several months of consecutive drops to the energy price cap, this time, it’s going up. It’s going to be about £8 more per month for the average household. The price cap was predicted to rise by about 3.5%, however, it’s rising by 5%.
The rise amounts to about £94 more per year, with bills already sky-high compared to historic bills, especially since extra support on bills ended in April. Here’s what you need to know about the cap and how much you’ll pay.
How the energy cap works
The energy price cap is a limit set every three months by Ofgem, the government’s energy regulator. It restricts how much an energy company can charge customers.
The cap applies to the price of your gas and electricity on your energy company’s default or standard variable rates. These basically can go up and down whenever the energy company likes. With the cap, the energy companies have to make sure their tariffs aren’t higher than the set rate.
Despite how it looks, it’s not the most you can pay for your bills. Instead, the prices set on the cap are the maximum price per unit of energy you use. Ofgem announces the figure as an annual price, as you probably don’t have a clue how many kwh of energy your family uses.
The quoted “cap” (£1,928) is an annual price based on a typical household. If you use more energy, you’ll pay more than the cap every year. Use less and you’ll pay less.
There are separate caps for gas and electricity, and each cap is also made up of a standing charge (a set amount each day, regardless of whether you use any energy) and a usage charge.
The cap will also vary depending on where you live in the UK, how you pay (e.g. direct debit) and the type of meter (credit or prepayment). Prepayment caps have always been a little higher, though that changed earlier this year. The new energy price cap also applies to those with a prepayment meter.
Crucially, if you’re on a fixed-rate deal the cap doesn’t apply and the price you pay won’t change until that fix ends.
What is the new energy price cap?
The latest announcement is for an increase to the price cap from 1 January until 31 March 2024.
The new cap for a “household with average use” is £1,928 a year. This is up by about £94, or 5% from the current rate, making it about £8 more per month than our current bills
Isn’t the new price cap similar to the last one?
It does seem like the new price cap is virtually the same as the last one. We wrote an update after the August announcement that the price cap would be £1,923, with bills virtually the same as we’re quoting here.
What’s actually changed is the “typical use” figures, so there was an artificial drop to the price cap – we have a whole explanation of what happened here.
What is the monthly price cap?
Despite Ofgem attempting to present the information in a way we understand, the total annual cap figure isn’t always the easiest to comprehend, so I think it’s easier to understand the price cap when you view it as a monthly direct debit. Your energy company calculates this by taking the predicted cost for a year based on your previous energy usage and dividing it by 12. It’s not 100% accurate, but it’s a handy comparison.
For the latest cap, the average monthly bill will be £160.66, which is £8 more every month than the current cap.
Comparing this to prices a year ago, it’s about 20% higher than the price we got with the energy price guarantee and £67/month grant, and 46% lower than we’d have got without them.
What is the current energy price cap?
The latest announcement in August decreased the cap from 1 October until 31 December 2023 to £1,923 for the average household, which was then decreased to £1,834 when the typical use figures changed.
The cap for a “household with average use” is currently £1,834 a year, down by £253 from the previous cap and 17% on the EPG.
When will the new cap come into play?
This new energy price cap will come into play on 1 January and will remain in place until 31 March. In February, there will be another announcement which will detail what the price cap will be from 1 April to 30 June.
How much will you pay under the new energy price cap?
Remember, the 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, it can vary regionally so you’ll need to check where you live to see exactly what it’ll be for you.
If you want to get a rough quick idea, you can add 5% to what you pay at the moment (multiply your current monthly bill by 1.05). This doesn’t take into account if you’ve got an accurate direct debit set-up but could give you a sense. If you want something a little more accurate, Money Saving Expert has a handy calculator to estimate what you’ll be charged. You’ll need figures showing your historical energy use, which can be found on your latest bill.
Will you pay more or less money with the new energy price cap?
If you’re on a variable tariff
Broadly, anyone on a standard tariff will be charged more per unit of energy from 1 January 2024. Of course, the bill itself will be based on your actual energy use.
If you’re on a prepayment meter
The really good news is that there is no longer a significant premium for those with prepayment meters. The last cap and new cap are the same as for everyone else.
If you’re already on a fixed tariff
If you’re fixed onto a tariff, your prices usually don’t change when the price cap changes. That’s because you’ve already agreed on a price per unit of energy for a fixed length of time with your energy supplier, usually 12 months. However, some fixes were reduced if they were above the EPG, so this could happen again if there are any drastic changes.
If you move onto a new fix
We’ve seen some fixed deals returning to the market recently. It might be worth checking them out to see if you’ll save, especially now the energy price cap is expected to rise. However, it could fall down the line, so be careful you don’t lock into a higher deal.
That’s because any comparison site is required to compare prices to what you’re paying now. So you could be told you’ll save money, but in reality, there’s a risk you’ll fix higher than the price cap rate.
How has the price cap changed?
As you can see, the really big changes have happened since October 2021. Before this the average direct debit was under £100, so even with this new cut, we’re still paying around 50% more than a year ago, and even more on top if you had been saving with a lower fixed rate deal.
These are the energy price caps going back to 2019, we’ve roughly adjusted them for the new typical use figures. You can see the historical price caps with the old figures below.
|Date||Cost per year with new typical use figures||EPG & grants||Average monthly bill||Change (+/-)|
|January to March 2023||£1,928||£3,000||£161||+5.13%|
|October to December 2023||£1,834||£3,000||£153||-7.95%|
|July to September 2023||£1,992||£3,000||£166||-17.04%|
|April to June 2023||£3,151||£2,402 EPG||£200||+50.33%|
|January to March 2023||£4,110||£2,402 EPG & £67/m grant||£133||0.00%|
|October to December 2022||£3,409||£2,402 EPG & £67/m grant||£133||-15.62%|
|April to September 2022||£1,893||£158||+54.35%|
|October 2021 to March 2022||£1,227||£102||+12.21%|
|April to September 2021||£1,093||£91||+9.21%|
|October 2020 to March 2021||£1,001||£83||-7.46%|
|April to September 2020||£1,082||£90||-4.50%|
|October 2019 to March 2020||£1,133||£94||-5.98%|
|April to September 2019||£1,205||£100||+10.29%|
|January to March 2019||£1,092||£91|
The energy price cap vs the energy price guarantee
In October 2022 a couple of government subsidies came along which meant no one was actually paying the cap. First, was a £400 discount added to all gas and electricity accounts, saving everyone £67 a month for six months, with the last payment hitting accounts in March.
Combined with this was another 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.
Until July 2023 the EPG was £2,500 a year (on average). It was then raised to £3,000.
At the same time, the price cap fell to around £2,000, meaning prices were governed by that lower cap rather than the EPG.
When is the next price cap change?
The price cap is reviewed every three months (though prior to October 2022 it was every six months).
The price cap will next change on 1 January 2024. We already know that this is £1,928. After this, it’ll change again on 1 March 2024, a change that will be announced in February 2024.
Price cap announcements & changes
- Announcement by 23 February 2024 for 1 April 2024 change
- Announcement by 28 May 2024 for 1 July 2024 change
- Announcement by 27 August 2024 for 1 October 2024 change
Will bills fall further?
The current predictions are that the price cap will fall again in April by about 6%, so there won’t be any massive reductions to our bills in the next few months.
How you can reduce your bill
Paying by direct debit will reduce your bills, so it’s well worth doing this.
Otherwise, it’s hard to do much to reduce what you spend on energy other than by using less energy. The standing charges will still apply, and bills will still be sky-high, but cutting back on gas and electricity will mean you pay less.
It’s worth giving accurate meter readings if you’re not on a smart meter. This will mean you’re more likely to have an accurate direct debit on current use, rather than what you used last year, and stops you from falling into debt on your energy account. Your energy firm will probably not change this automatically, so you might need to ask.
Don’t forget a direct debit does average the spend out over the year so you should hope to overpay in the summer and underpay in the winter to help even out your bills.
Is any other help available?
There’s been no new energy bill subsidy announced, and it’s unlikely it’ll happen.
Additional cost of living support was announced in November 2022 for those on certain benefits, with payments until Spring 2024.
You can also talk to your energy supplier to see if they have support or grants available for customers. British Gas has a grant for non-customers too. We’ve written about your options and the consequences if you can’t or choose not to pay.
Historical energy price caps
These are the energy price caps from before the typical use figures changed. This change made it difficult for us to compare new caps with the old ones, so we’ve converted the old price caps into ones with the new typical figures above.
|Date||Max annual bill for a typical household||Average monthly direct debit||Change +/-|
|October to December 2023||£1,923 price cap / (£3,000 EPG)||£160.25||-7%|
|July to September 2023||£2,074 price cap / (£3,000 EPG)||£173||– 17%|
|April to June 2023||£2,500 EPG / (£3,280 price cap)||£208 (£273.33 without EPG)||+ 19% (-23.3%)|
|January to March 2023||£2,100 (£2,500 EPG – £400 grant) / (£4,279 price cap)||£175 (£356.58 without EPG and grant)||+ 0% (20.5%)|
|October to December 2022||£2,100 (£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|