Regulator Ofgem has cut the energy price cap for the last three months of the year by £150, but the end to support schemes means millions of households are still set to pay more for energy than in 2022.
The new cap of £1923 per year will apply from October to December, when households are likely to turn their heating back on. It is almost £600 lower than the £2500 Energy Price Guarantee that superseded the cap last winter.
The cap is a limit on the amount that is charged per unit of energy, though it is typically expressed in terms of average household bills for direct debit customers in a two-to-three person household. It is not a maximum household bill, meaning those using a large amount of energy are likely to pay more than the cap amount.
Households that use more energy, such as large families, are more likely to be better off this autumn than last. Smaller households, like those living alone, are more likely to be worse off as the support scheme would have covered a larger proportion of their bills.
The new figure also remains much higher than before Russia’s invasion of Ukraine, which sent the price of natural gas skyrocketing. During the last three months of 2021, the cap was £1,277 a year.
Jonathan Brearley, Ofgem CEO, said: “It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter.
“That’s why we’ve introduced new measures to support consumers including reducing costs for those on pre-payment meters, and introducing a PPM code of conduct that all suppliers need to meet before they restart installation of any mandatory PPMs.
“There are signs that the financial outlook for suppliers is stabilising and reasonable profits are returning. With the small additional allowance we’ve made to Earnings Before Interest and Tax (EBIT), this means there should be no excuses for suppliers not to be doing all they can to support their customers this winter, and to reinforce this we’ll be introducing a consumer code of conduct which we will look to have in place by winter.
“This code will ensure there are clear expectations of supplier behaviours especially for their most vulnerable consumers with whom suppliers should be reaching out proactively, with compassion and understanding. There are great examples of suppliers already doing this but I want to see this become the norm in such an essential sector that has such a big impact on people’s lives.”
David Cheadle, Chief Operating Officer at the Money Advice Trust, the charity that runs National Debtline, said: “Today’s price cap announcement may be a welcome sign that energy prices are coming down, but it offers little solace for households who have already seen their energy costs spiral.
“This is an extremely worrying time for people who have fallen behind on their energy bills, whilst grappling with high costs across the board.
“Looking ahead to winter, many households will face impossible choices without further support.
Forecasters at specialist energy analysts Cornwall Insights have said that they don’t expect bills to fall back to pre-2020 levels “before the end of the decade at the earliest”.
The lower cap had been widely expected after a fall in wholesale energy prices.
But a recent increase sparked by fears of an Australian gas workers’ strike, means the next cap - covering the crucial January to March period - may not be meaningfully lower.
Many companies have come under fire for alleged profiteering as customers faced sky-high energy bills. Oil and gas supermajors Shell and BP both reported some of the biggest profits in UK history in 2022, while British Gas made a profit of £969 million in the first half of this year, mostly due to a rule that allowed the company to recoup lost costs when the price of energy fell.