Ofgem lowers energy price cap to £2,074 for England, Wales and Scotland

Ofgem has announced a change to its energy price cap for England, Wales and Scotland, meaning annual household energy bills fall to £2,074 a year from July, a drop of £426¹. The cap replaces the Government's Energy Price Guarantee, which since October had limited the typical bill to £2,500¹. The announcement was made on 25 May 2023¹.

Under the cap, energy bills for a typical household are around £173 per month, or £2,074 per year, with an average electricity unit rate of around 30p per kWh and an average gas unit rate of around 8p per kWh². The cap limits the price of a single unit of energy for customers on variable tariffs and does not apply to those on a fixed tariff². Price-capped rates vary by where a household lives and how it pays, and the total bill depends on how much electricity and gas is used². The cap is set by Ofgem, is based on wholesale rates, changes every three months and was expected to rise in January 2024².

From 1 October 2023 the figure was expected to drop slightly to around £160 per month, with the electricity unit rate changing to around 28p per kWh and the gas unit rate to around 7p per kWh, while daily standing charges were staying the same or possibly increasing slightly².

The fall in the cap coincides with the end of the £400 universal Government support provided over the winter, meaning that in practice many will not notice the difference¹. The £400 Energy Bill Support Scheme gave every UK household monthly discounts between October 2022 and March 2023 and ended in April 2023; the Chancellor did not announce a repeat of the scheme next winter in the Spring 2023 budget².

Which? estimated that a median-usage household would pay £135 more in the 2023/24 financial year than in 2022/23, with an annual bill rising from £1,983 to £2,118, because the fall in prices was not enough to make up for the ending of the £400 support³. It estimated the average household in the lowest 10% of incomes would pay £209 more in 2023/24 than in 2022/23, £75 more than the increase faced by median-usage consumers, because lower energy usage means a smaller gain from lower prices while the loss of the £400 is the same³.

Why it matters for households

The cap sets the maximum price per unit of energy, not a cap on the total bill, so what a household pays depends on usage, location and payment method². The £2,074 figure is for a typical household on a variable tariff; fixed tariffs are outside the cap². Because the lower cap took effect at the same time as the £400 universal discount ended, Which? estimated that households would pay more across 2023/24 as a whole than in 2022/23, and that the increase would be larger for those on the lowest incomes³. Households on prepayment meters cannot spread costs across the year, which Which? said may pose problems in winter months when consumption and bills are higher³. The Budget 2023 confirmed that prepayment meter prices would be the same as direct debit prices from April 2023 onwards³.

What happens next

The cap changes every three months and was expected to rise in January 2024². From 1 October 2023 the typical bill was expected to fall slightly to around £160 per month². Which? said the 2022 Autumn Statement committed to having a new approach to consumer protection, such as a social tariff, in place by April 2024, and that progress needed to be made urgently³. No further change to the cap beyond the October figure has been reported.