On July 1st, when Ofgem‘s most recent energy price cap goes into effect, household gas and electricity bills will alter. 

Here is everything you must know. The cap, published quarterly, limits how much utility companies can charge consumers for each unit of gas and electricity used.

It establishes the following:

The maximum amount energy companies are allowed to charge per unit (measured in kilowatt-hours) of gas and electricity; The maximum daily standing charge, which is the portion of your bill that funds your connection to the grid.

Consequently, the more energy you consume, the more you pay.

It only applies to those in England, Scotland, and Wales on standard variable tariffs, also known as default tariffs. Currently, this is the case for the majority of households, regardless of payment method. It does not apply to the limited number of people on fixed-rate tariffs, which energy companies set and not the regulator, and those who heat their homes with oil.

In May, Ofgem announced that it would reduce its price limit from £3,280 to £2,074, but it will not take effect until Saturday. 

It implies that the average annual household energy bill will decrease by £426. 

A typical household would spend £2,074 over a year based on the updated unit price. However, the total annual cost per customer will vary based on the number of occupants, square footage, and energy consumed. The unit costs of gas and electricity are decreasing by approximately 3 pence. According to money-saving advocate Martin Lewis, this will result in approximately a 17% decrease in monthly expenses.

He said you will now pay £83 for every £100 you previously paid for energy.

What about the government’s assistance programme?

The government‘s energy price guarantee (EPG), which capped annual energy costs for the average household at £2,500 – subsidising Ofgem’s price cap – has partially protected households from the most recent price increase.

Because the government’s EPG was lower, the current price cap of £3,280 for March to June was rendered unnecessary. This support – £400 over six monthly payments – expires tomorrow, allowing the price ceiling to return to effect.

People have been exhorted to submit meter readings by Friday at midnight to pay the new, lower rates as soon as they take effect.