Energy Price Cap Update

It's no secret there's an ongoing energy crisis and many people have seen their home energy bills sharply increase throughout 2021 and into 2022. This has led to a significant increase in Ofgem's energy price cap.

In April 2023, the price cap is set to fall for the first time since 2020. Here, we take a look at what the energy price cap means for your home energy bills.

What Is The Current Energy Price Cap? 

From the 1st April 2023 the energy price cap will be set at £3,280, a reduction of £999.

However, homeowners could still see their bills increase due to a planned reduction in government support.

Why Has The Energy Price Cap Fallen?

The price cap only limits the amount you can be charged per unit of gas and electricity.

Ofgem, the energy regulator, evaluates the wholesale prices every six months and adjusts the price cap accordingly. As the energy price cap is based on these prices, it is easy to predict upcoming price changes.

As the wholesale prices have fallen in recent months, Ofgem has reduced the price cap to fall in line with these market changes.

The price cap is adjusted every three months and applies to customers on standard variable (or default) energy tariffs. You can be on a default tariff whether you pay via direct debit, standard credit, or use a prepayment meter.

How much will I pay for home energy? 

Despite the reduction in the energy price cap in April 2023, households are likely to see their energy bills increase.

As energy prices increased rapidly in 2022, the government introduced support packages to help households with their energy costs. This included the Energy Price Guarantee and the £400 winter bills discount. These support measures led to the average household paying around £2,100 for their annual energy bills.

However, the winter bills discount is set to end from April. The good news is that the Energy Price Guarantee will be extended until July, meaning the average household bill will be limited to around £2,500 which is £780 below the April 2023 price cap. 

Should I Fix My Home Energy In 2023?

For some, maybe. If you have recently been moved onto a variable tariff you have seen some protection from the energy price cap and government support, albeit still expensive compared to your old fixed-price deal.

It may be wise to switch your home energy if the tariff offered is lower than the expected price cap in April 2023. However, it is still not known exactly what government support will be provided.

You should also consider switching if you do not like the uncertainty around what you could be paying each month. A nightmare for household budgeting could cause a lot of stress when wholesale energy prices are consistently fluctuating.

Can I Get A Cheaper Energy Deal?

The mentality of the energy market has changed from saving money in comparison to your previous energy tariff to saving money in comparison to Ofgem's energy price cap.

You may still find that fixed-rate deals are more expensive than the current price cap. If you cannot find a deal cheaper than the expected price cap deal, you may be better off staying on a default tariff.

You can compare current home energy prices here.

What Does The Energy Price Cap Mean For Me?

It is important to note that the cap won’t limit your total bill. The price cap ensures a household using an average amount of energy won’t pay more than the cap each year.

So, if you use more energy than the average household, you could still pay more than the price cap amount each year.

If you’re on a fixed rate tariff, the energy price cap won’t apply to you. This is because fixed-rate tariffs will often offer better rates than the energy price cap.

Your gas and electricity rates will still be affected by:

• Your contract type
• Your location
• How much energy your household uses

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