Energy prices are changing: here's what it means for you
New energy price figures announced today mean your energy bills will fall by around 7% from 1 October if you're on a variable tariff.
But prices still remain higher than before the energy crisis. Without the extra government payouts we got last winter, many homes will still find their monthly bills are significantly higher than they were this time last year.
The 1 October change applies to your bills if, like most people, you're on an out-of-contract, standard or variable tariff. It won't apply if you've chosen a fixed deal.
The typical household will pay around £1,923 per year for gas and electricity from 1 October, energy regulator Ofgem announced this morning. That works out as about £160 per month.
This figure can be confusing, though. It's an estimate for a 'typical' household that uses a 'medium' amount of gas and electricity, so it's unlikely that you'll use exactly that.
Instead, we suggest that you look at how much you'll be paying for each unit of energy – from 1 October the averages for these will be around:
- 6.89p per kWh for gas
- 27.35p per kWh for electricity
That's slightly lower than current rates, but not much. Plus, daily standing charges will stay high, at an average:
- 29.6p per day for your gas supply
- 53.4p per day for your electricity
That's more than £25 a month for a household using both fuels, before you've even started paying for the energy you use.
Your energy supplier should be in touch to tell you your new prices. The exact split between your unit prices and standing charges will be different depending on the region you live in.
Use our free, independent energy comparison service to compare gas and electricity prices and find the best provider for you.
New energy price cap figures explained
From 1 October, the average rates direct debit customers pay will be, on average:
- 53p electricity daily standing charge – the same as current rates
- 27p electricity unit rate (price per kWh used) – down 2p from current rates
- 30p gas daily standing charge – slightly more than current rates
- 7p gas unit rate (price per kWh used) – down 1p from current rates.
The exact rates you pay depend on where you live.
If you prepay for energy, the cap is slightly higher, by around £25 over the year. Ofgem has said that it's seeking to permanently end the prepayment premium.
If you pay by cash or cheque on receipt of your bills, rates will be 6.7% higher compared with paying by direct debit.
You don't need to do anything to get the new, cheaper rates. Your supplier will change them automatically.
To get the maxmimum benefit from the lower prices, make sure your supplier gets your meter readings on (or as near as you can to) the day prices change. If you have a smart meter set up to send half-hourly or daily readings, it will do this for you.
Find out more: what is the energy price cap?
How will my energy bills change?
It's hard to work out how much you'll pay over the next year on a variable tariff with the price cap changing every three months. While the headline prices quoted today are 'per year', you'll only pay them for three months. Every three months your energy prices will slightly change.
That's why we've created a tool that takes into account Ofgem's latest price cap announcement, plus predictions for the cost of energy in the next year.
Input your current direct debit payments – what you pay per month right now – and it will give you an idea of what you can expect to pay for gas and electricity from October and over the next year.
Energy Cost Calculator
Use our simple tool to predict your energy payments for the next 12 months if you stay on a variable tariff and pay by monthly direct debit.
What are your current monthly direct debit payments?
£
If you're weighing up a fixed deal, you can use this tool to compare it with what you'd pay over the year if you stuck with a variable tariff.
If you think you might be better off with a fixed tariff, check our advice on how to get the best energy deal to see what's currently being offered by energy companies.
Will energy prices drop in 2024?
No, unfortunately we're unlikely to see bills get much lower.
The price cap changes every three months, so the rates announced today will apply from 1 October until 31 December 2023.
The lower rates for the end of 2023 are owing to a drop in wholesale costs earlier this summer.
But gas prices in Europe have gone up again more recently. So in January 2024, the price cap is expected to rise again by around 1%, according to energy consultancy Cornwall Insight's predictions.
Then it's expected to fall slightly in April and July 2024, but remain higher than this October's rates.
All of these prices are higher than before the energy crisis.
If you're offered a fixed deal by your provider, or another one, thats similar to the prices you're paying now, it's worth considering. But always check how much a deal's exit fees are as some can charge a sizable fee if you want to leave your contract early for any reason.
Get more advice on how to switch energy provider.
Energy bills in winter
In autumn and winter, most households use a lot more gas and electricity than in the summer months. So although the price cap will be lower for the start of winter, you'll notice the amount of money leaving your account each month is higher as you turn on the heating and the lights.
If you pay by direct debit, your provider should have factored this into your monthly payments to try to even them out across the year and build up some extra credit through the summer months.
To minimise how much you spend on energy this winter, now is a good time to book in a boiler service and start to consider what energy-saving measures might suit your home, such as an insulation top up or some extra draft proofing. Here are a few guides to get you started:
- Getting the best boiler service
- How to make your home more energy efficient
- Lost insulation costs and savings
- How to draught-proof your home
We know energy bills aren't the only high cost right now. The cost of living is hitting hard from every angle.
For all our tips and advice across a range of topics, head to our list of 20 ways to save money on household bills in 2023.
