There’s a 17% drop on current rates, meaning the average home will pay £173 each month.
The energy price cap is down for the second consecutive quarter. And unlike three months ago, it’s actually below the Energy Price Guarantee, meaning bills will actually fall for the first time in 18 months.
But they’re still sky-high compared to historic bills, especially since extra support on bills ended in April. So it likely won’t make much difference to your available cash.
Here’s what you need to know about the cap and how much you’ll pay.
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How the energy cap works
The energy price cap is a limit set every three months that 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.
It’s not a cap on 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. So any prices you see are based on a typical user. 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) and a usage charge. Controversially, the standing charge has increased a lot recently.
The cap will also vary depending on where you live in the UK, how you pay (eg direct debit) and the type of meter (credit or prepayment). Prepayment caps have always been a little higher – more on this later.
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.
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, 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 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 now the EPG has been £2,500 a year (on average). It was due to increase to £3,000 in April, but that was paused until July due to campaigning by the likes of Martin Lewis. So our bills have been capped below the Energy Price Cap since October.
And in fact, there were extra measures, such as the £400 grant spread of six months, which meant really we were paying £2,100.
How much is the energy price cap?
The latest announcement (in late May) is for a decrease to the price cap from 1 July until 31 September 2023.
The new cap for a household with average use is £2,074 a year. That’s down by £3,280 or 37% from the current rate, and down 17% on the EPG rate.
But it’s only £21 less than bills from October to April where the EPG was subsided by £67 off each month.
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 £173, which is £35 less every month that the current cap. That’s massive.
Comparing this to prices a year ago, and it’s three times as much. And if you were on a fixed deal, it’s likley you were paying even less.
How much will you pay?
Remember, the price cap figures are based on average use. If you use more than this averge 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.
If you want to get a rough quick idea, you can of course subtract 17% from what you pay at the moment. This doesn’t take into account if you’ve got an accurate direct debit set-up. But you’ll get 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.
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Will you pay more or less money?
If you’re on a variable tariff
Broadly, anyone on a standard tariff will be charged less per unit of energy from 1 July 2023. Of course, the bill itself will be based on your actual enery use.
If you’re on a prepayment meter
The really good news is that there will no longer be a significant premium for those with prepayment meters. The cap is roughly the same, coming in at £2,077 a year for the average household.
If you’re already on a fixed tariff
Usually your prices don’t change during a fix. That’s because they’ve already set a price per unit of energy for a fixed length of time, usually 12 months. However, some fixes were reduced if they were above the EPG. Since the EPG is now £3,000 it could be previously subsidised fixed bills get higher.
If you move onto a new fix
It’s likely we’ll see fixed deals return to the market, and it’s worth checking them out to see if you’ll save. Just be careful in the months between now and the new cap beginning in July.
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 from this table, 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 75% more than the historical cap, and even more on top if you had been saving with a lower fixed rate deal.
|Date||Max annual bill for a typical household||Average monthly direct debit||Change +/-|
|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|
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 July 2023, and we already know what this is (see above). After this, it’ll change again on 1 October 2023, and will be announced in August 2023.
Will bills fall further?
The current predictions are that the price cap will fall slightly again in October, then come back to around the July rate in January 2024, so don’t expect there to be any massive savings on the horizon.
Price cap announcements & changes
- 25 August 2023 announcement for 1 October 2023 change
- Late November announcement for 1 January 2023 change
- Late February 2024 announcement for 1 April 2023 change
- Late May 2024 announcement for 1 July 2023 change
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 other than use 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. 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.
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 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. I’ve written about your options and the consequences if you can’t or choose not to pay.
5 thoughts on “Energy price cap falling to £2,074 from July”
I should add that I paid no exit fees. The exit fees for the new fix are very hefty, but waived if I stay with the same supplier.
If you fix around October/November, the prices are likely to reflect the predicted January increase. If you are already on a fix, you are likely to get a good offer, though there have already been substantial increases since I fixed at the beginning of August. For existing customers on the price cap with my supplier, the offers are truly horrendous. 3 or 4 times higher than my offer, so this probably only works for those already on fixes.
Again I stress, I am only giving my experience, not advice.
Andy. I’m trying to understand how the price cap works for a medium / high user of gas and electric. My supplier just failed and I’ll be moving onto a SVR soon. I’m a high user of gas so will there be no benefit to me from the cap ?
Andy, My current tarrif ends on 15th November. Should I opt to switch before 1st October or make the most of the 1
Hi Daniel, it’s hard to say but you will need to take into account any exit fees (though these are waived 49 days before your tariff ends). I’d expect the new rates to be so much higher that you’d save the difference by switching before.
Don’t know if this helps. My fix was due to end on October 31 this year. My DD was down to £45. per month. I checked the latest figure for an new fix offered to me by my supplier and it came to less than £2000 a year, so I came off the old fix at the beginning of August and took it. It’s a 2 year fix. I’m now paying £148 a month and it should average £163 based on my current annual usage. I’m paying more than £100 a month more between now and the end of October than I would have done on the old fix. The new unit prices I am paying are slightly higher than the October price cap, so if I am paying less than £2000, I must be using a lot less energy than average.
Where do I gain in all this? Hopefully from January 2023 onwards, when my costs will remain fixed and I won’t pay the new increases. I will need to save a bit over £300 to break even, but from current predictions, this shouldn’t be difficult and I’ll go on to gain. I noticed that that the latest offers on fixes from my supplier have already gone up by £70 per month since I fixed.
This is just my experience and guessing and not advice, as it’s a bit like gambling on the futures’ market, but I hope it helps.