Energy price cap falls, but your bills are still set to rise

The limit on how much energy companies can charge you will fall on 1 April, energy regulator Ofgem announced today. However, for most households, bills will still go up.

The new limit for a 'typical household' will drop to £3,280 per year, down £999 from the current cap level.

If these amounts sound unfamiliar, that's because they're not what households are actually paying.

What you're paying right now has been reduced because of the government's energy price guarantee (EPG), which has protected households from the full amount of the Ofgem energy price cap. This limits the unit price, and bills for a typical household are currently around £2,500 per year.

However, the EPG is also set to change on 1 April. It will be less generous and limit that illustrative figure for a typical household to around £3,000 per year, according to the government. 

Many consumer groups and charities, including Which?, are calling on the government to postpone the change to the EPG figures so households can continue to pay the same amount for energy and not see prices rise for the three months from April to July 2023. 

It's important to remember that neither the EPG or the Ofgem price cap are a cap on the total amount you'll pay. The EPG determines individual unit rates for each kilowatt hour of gas and electricity you use. So the more you use, the more you pay. 

The exact unit rates from 1 April aren't known yet. We'll update you as soon as we find out.

Read more: what's the difference between the energy price cap and EPG?

How much will I pay for gas and electricity?

Exactly how much you'll pay will depend on how much gas and electricity you use.

The sample figures given are based on a typical household using 2,900kWh electricity and 12,000kWh gas per year.

What you'll actually pay is also determined by the EPG.

The government is planning to reduce EPG support from 1 April, when your bills could increase by around 20%, or £500 per year, according to energy consultancy Cornwall Insight.

The average unit rates under the new EPG haven't been revealed yet. 

Help is available if you're struggling to pay your energy bills.

Why is the energy price cap changing?

The price cap sets a maximum amount energy suppliers can charge customers for a unit of energy. It is reviewed every three months by Ofgem, the energy regulator.

Wholesale prices have fallen, so the price cap is decreasing to reflect this. 

This price cap will apply from 1 April to 30 June 2023.

If the costs of buying and providing energy continue to fall, prices paid by customers could drop in July 2023, according to Ofgem. It would be the first time prices have dropped since the global gas crisis began 18 months ago.

The price cap is falling, but not by enough

Rocio Concha, Which? director of policy and advocacy, says: 'The price cap is coming down, but not by enough to help people who will face a sharp spike in their energy bills in April when the government withdraws the energy bill support scheme and the price guarantee jumps to £3,000 for an average household.

'This increase will be especially difficult for customers on a pre-payment meter. They are more likely to be on lower incomes, and they're not able to spread the increased costs evenly over the year.

'In the absence of an effective means to target support, the best thing the government can do to support people is to postpone increasing the energy price guarantee to £3,000. For some families, who continue to be battered by high inflation, this will offer an important lifeline to stop them from falling into financial distress.'