Winter Creeps Closer as New Price Cap Arrives
As a potentially harsh winter approaches, households across Britain are bracing themselves for financial challenges despite a temporary drop in domestic energy prices. Charities warn that while the typical annual bill will decrease, many consumers will still struggle to make ends meet.
In this article, we investigate the impact of fluctuations in energy prices, Government support and the new Ofgem Energy Price Cap.
The Energy Price Cap
Energy regulator Ofgem introduced the price cap to protect consumers from excessive energy costs. It limits the maximum amount that energy suppliers can charge for each unit of gas and electricity but doesn’t cap the overall bill, meaning the more energy households use, the more they pay.
The cap benefits consumers who pay via Direct Debit, standard credit, prepayment meter or have an ‘E7 meter’.
Adjusted Cap from 1st October
In the period from 1st July to 30th September 2023, the price cap was at
£1,976 for typical consumption levels, but from 1st October until the end of the year, the cap will reduce to £1,834.
The maximum price per unit has fallen from 30 to 27 pence per kWh for electricity. Consumers will pay up to 7 pence per kWh for gas, just a penny adjustment from the previous three-month period.
Potential Problems for Prepayers
Those reliant on prepayment energy meters could face challenges this winter. These households now pay a similar amount to those using a Direct Debit, amounting to approximately £250 a month.
For some consumers, topping up the meter can become a constant struggle, as when the funds run out, so does access to heat, hot water and the ability to cook a hot meal.
The head of the Fuel Bank Foundation, Matthew Cole, expressed concern that this could force some to make difficult choices, such as skipping meals and showers, in a desperate attempt to keep their homes warmer for longer.
EPG No More
Last year, Government support in the form of the Energy Price Guarantee (EPG) and £400 worth of assistance over six months helped limit the damage of bill increases.
In response to criticism over the impending 80% rise in energy costs, the Government introduced the EPG in October 2022. The objective of the scheme was to limit the impact on billpayers by capping prices and compensating suppliers.
However, this year, an equivalent scheme has yet to be announced. To make matters worse, analysts predict that the typical annual bill may rise to £1,996 in January 2024.
Alternative Government Support
Recognising many people face looming financial difficulties, the Department for Energy Security and Net Zero has offered support for the most vulnerable, including a £150 Warm Home Discount and fresh cost of living payments of up to £900 for millions of eligible households.
Regardless, a coalition of 140 organisations and Members of Parliament is currently urging the Government to consider implementing a ‘social tariff’ to further assist those struggling with energy bills.
As the cold sets in, a drop in energy prices offers some respite to bill payers in the UK, but the challenges ahead remain daunting. The plight of prepayers and the cumulative impact of rising bills over the last two years are causes for concern.
While the Government has been clear that it will support the most vulnerable individuals, there is a growing call for more wide-reaching assistance. Policymakers need to continue addressing these issues to avoid further hardship.
How Can I Save Money on Energy Bills?
With rising energy costs, saving money on your bills is more vital than ever. At UKPower, we can help you compare gas and electricity suppliers to find the cheapest energy prices, switch to a better deal and cut the cost of your energy bills.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.