February 27, 2023, the energy regulator Ofgem updated the energy price cap from April 1 to June 30 2023.

From April 1, the energy price cap will be set at a level of £3,280 for a household paying by direct debit based on average consumption. This is a drop of nearly £1,000 from the present level of £4,279, reflecting recent declines in wholesale energy costs.

If the government’s Energy Price Guarantee were not in existence, consumers on the introductory rate of their energy suppliers would pay £3,280 annually.

The government set the EPG at £3,000 for the average bill as of April 1, meaning households would not pay the entire energy price cap.

This reduction in the price cap represents a substantial decrease in the cost of acquiring and delivering energy to customers. If this trend continues, consumer prices will fall for the first time since the worldwide gas crisis more than 18 months ago by the summer.

Since January 2019, the government-imposed energy price cap has been in effect, and Ofgem must conduct periodic reviews of its level. It ensures that an energy company may recover its efficient expenses while ensuring customers pay only what they should for energy. 

The law-mandated price cap does this by setting a maximum price per unit of energy that suppliers may charge.

CEO of Ofgem Jonathan Brearley stated: “While wholesale prices have decreased, the price cap has not yet dropped below the level envisioned by the Energy Price Guarantee. This means that, based on present policies, bills will increase once more in April. I know this news will be quite troubling for many households.”

“However, today’s announcement reflects a crucial shift in the cost of energy for the first time since the crisis began, and while it won’t have an immediate impact on consumers, it’s a sign that some of the enormous pressure we’ve seen in the energy markets over the past 18 months may be beginning to ease. If the current decline in wholesale costs continues, the price cap will likely decrease again in the summer, which could result in much lower bills.” “Yet, it is unlikely that prices will return to their pre-energy crisis levels. Even with the significant government assistance now in place, this is a challenging period for many British homes.”

When people are struggling, we urge them to contact their providers to ensure they receive all the assistance and support they are entitled to. 

With costs continuing to be so high, examining the viability of a social tariff for customers in the most vulnerable situations is imperative. Ofgem has enacted stringent regulations to aid those in precarious situations, and suppliers must offer payment options and direct clients to appropriate assistance. The EPG will continue to provide additional assistance to billpayers until the end of March 2024, as affirmed by the Chancellor on November 17, 2022. The government determines the level of support.

Consumers are not required to take immediate action in response to today’s statement.

Ofgem continues to protect consumers through its comprehensive market regulation, taking enforcement action where necessary and assisting those in need. The following quarterly change to the price ceiling will occur on May 26 2023.

The scheme is administered by Ofgem, which publishes cap rates quarterly.

The government enacted the tariff cap to prevent overcharging of default tariff consumers (i.e., those on standard tariffs). Updates to the price ceiling are currently announced quarterly. The price cap level is based on the average usage of a typical home and represents a cap on the energy price, not on total expenses. The amount a consumer pays varies according to how much energy they consume, where they live, and how they pay for their energy.

The price cap protects about 27 million consumers with variable or default credit metre rates. The annual limit of £3,280 is based on a dual-fuel, typical-consumption family paying by direct debit for electricity and gas. The price ceiling is currently changed quarterly.

For clients who pay with regular credit (cash or check), the default maximum for typical dual fuel usage has dropped by £1051, from £4,533 to £3482. The additional charges represent the increased cost for energy providers to provide service.

Almost 4 million prepayment metre (PPM) users are among the 27 million protected by the price cap. 

The PPM level of the default cap for average dual fuel consumption was lowered by £1034, from £4,358 to £3,325. The higher costs associated with serving PPM consumers are reflected in, the higher prices charged to PPM customers. Typical electricity use for Economy 7 clients paying by direct debit has reduced by £695, from £2,988 to £2,293. (4,200 kWh).

The values stated in the paragraph above include VAT and are based on the current Typical Domestic Consumption Values (TDCV) for Economy 7 of 2,900kWh for electricity, 12,000kWh for gas, and 4,200kWh for gas.

The price cap is on gas and electricity units, considering standing costs. 

There is no cap on consumers’ overall energy bills, which will continue to increase or decrease proportionally to their energy consumption. From April 1, the comparable per unit level of the price cap for a typical client paying through direct debit will be 51p per kWh for electricity customers and 53p per day for a daily fixed fee. The equivalent unit rate for a typical gas client is 13 pence per kilowatt-hour, with a daily payment of 29 pence.

Currently available government assistance for consumers:

  • Via the Energy Bills Assistance Plan, millions of British homes will receive a £400 non-repayable discount on their energy bills beginning in October of this winter.
  • Warm Homes Discount: beginning in October, a £150 Warm Homes Discount will be granted to 3 million low-income households.
  • In addition to the Energy Bills discount, households in greatest need will be eligible for further aid. This consists of the following:
  • Cost of Living Payment of £650 for about 8 million households receiving means-tested payments
  • A one-off £300 Pensioner Cost of Living Payment will be provided alongside the Winter Fuel Payment to nearly 8 million senior households.
  • A payout of £150 to around six million Britons who receive various disability benefits.
  • Increase and extension of the Household Assistance Fund by £500 million.