It looks like the October price cap has changed — here’s what’s happened
by Zoe Stabler, Senior Writer
The latest energy price cap that kicked in on 1 October was announced in the summer to be £1,923 a year for the “average household”.
However, you may have noticed that the figure quoted is now £1,834. So have energy prices dropped even more?
Sadly, this isn’t the case. We’ll explain what’s happened to the price cap so you can work out what you’ll be paying this winter
Have energy prices fallen?
First up, yes, energy prices are on average 7% lower for the next three months than they were between July and the end of September.
The price cap in that period was £2,074 a year for a typical household. This was then due to drop on 1 October to £1,923 a year.
That means that since 1 October you’ve been paying less for the energy you use, and it’ll stay at those rates until the end of December.
Has the October price cap changed?
Where the confusion lies is that Ofgem is now claiming that the typical household bill from October is a lower £1,834 a year, which suggests the price cap itself has fallen even more, and we’re getting charged less for energy use.
However, the current price cap rates themselves, which is what energy companies can charge you per unit (for each kilowatt of electricity and gas), are actually exactly the same as those announced in August.
Instead, Ofgem has changed how much energy it considers the “average” household to use. This is lower than its previous estimations, which has led to an artificial drop in the quoted price cap and makes it really difficult to compare with previous caps.
What’s the energy price cap?
The energy price cap is a limit to how much your energy supplier is allowed to charge you for your gas and electricity in Great Britain. While there are set prices per unit, this is presented to us as the maximum annual bill for a “typical household”.
If you’d like to find out more about the energy price cap and how it works, you can check out our latest articles about it.
How is the energy price cap calculated?
A lot of people think that the energy price cap is the maximum they’ll pay for electricity, but this isn’t the case.
There’s a maximum per kilowatt of electricity and gas that you can be charged. It varies slightly depending on your region, but this is around 6.9p per kwh of gas and 27.3p per kwh of electricity. The price cap is revised every three months.
This means nothing to the average person, so Ofgem has calculated how much the “typical household” uses. This average household uses about 2,700kwh of electricity and 11,500kwh of gas.
In addition, the standing charges are around £108 for gas and £185 for electricity – again, this depends on your region
Here’s how they reach that new figure of £1,834:
|Gas usage||6.9p x 11,500||= £793|
|Electricity usage||27.4p x 2700||= £739|
|Standing charges||£108 + £194||= 302|
|Energy price cap||= £1,834|
What is household typical consumption?
Household typical consumption, known officially as the “Typical Domestic Consumption Value” (TDCV) is the amount of energy and gas that a “typical household” consumes each year. Ofgem had this at 2,900kwh in electricity and 12,000kwh in gas.
Ofgem now estimates the typical household to use 2,700kwh of electricity and 11,500kwh of gas in a year.
Why has typical use dropped?
Typical use has changed for a couple of reasons. First, our homes and appliances have become more energy efficient over time, resulting in less energy being used. In addition, as a result of recent soaring energy bills, there’s less demand for electricity and gas, with 80% of homes now rationing their energy usage during the winter.
What’s a typical household?
Ofgem’s calculations are for a “typical household”, which it says is a semi-detached house with 3-4 people living in it. Theoretically, smaller households will pay proportionately less, while bigger households will pay proportionately more, however, this depends on your energy use.
The new energy price cap vs the old cap
The October price cap is the first one to use the new typical use figures, which makes it difficult to compare it against the previous cap.
We’ve calculated the typical household bill under the price cap using both the new and old typical use figures in order to make them comparable.
The main takeaway here is that the cap has fallen by 7% in this period compared to the July cap.
|Typical use||1 July 2023 to 30 September 2023 – previous price cap||1 October 2023 to 31 December 2023 – current price cap|
|Old typical use figures||£2,074 per year||£1,923 per year|
|New typical use figures||£1,976 per year||£1,834 per year|
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What will the January energy price cap be?
The next price cap will be the January cap, which will be announced in November 2023.
Analysts Cornwall Insights has forecasts and predictions of what the future price caps will look like. We’ve laid them out below using the old and new “typical use” values.
|Typical use||1 January 2024 to 31 March 2024 – Prediction||1 April 2024 to 30 June 2024 – Prediction||1 July 2024 – 30 September 2024 – Prediction|
|Old typical use figures||£1,996 per year||£1,912 per year||£1,872 per year|
|New typical use figures||£1,898 per year||£1,820 per year||£1,781 per year|
How to estimate your energy consumption and cost
The best way to work out how much you’ll spend on your electricity going forward is to look at your previous bills. This will tell you how much energy you use in kwh and your standing charges.
Try to look at a bill from the same period last year, so you can take into account any additional use from colder weather, such as from using the heating or your dryer.
On recent bills, you’ll be able to see how much you’re being charged per kwh for each type of energy – you can use these figures if your latest bill came after 1 October 2023. If not, it’s worth checking out the regional energy rates from uSwitch.
You’ll want to multiply your average electricity usage by your region’s unit rate for electricity and the same with gas.
For the standing charges, multiply each one by 30 to get the cost for a month.
Adding this all up will give you an average monthly cost, as long as your energy usage hasn’t dramatically changed.