Ofgem has lowered the energy price cap by more than £1,200 for the average household in England, Wales and Scotland.
The reduction will come into effect from July 1, with the price cap dropping from £32,80 per year to £2,074 per year to reflect the recent falls in wholesale energy prices.
The lower cap will replace the Government’s Energy Price Guarantee (EPG), which currently limits the typical household energy bill to around £2,500.
The energy Price Cap will change from 1 July 2023
The new #PriceCap is £2,074
The level is based on typical use of an average household on their supplier’s standard default tariff
It’s a cap on energy unit price, not a cap on total bills
— Ofgem (@ofgem) May 25, 2023
It means the average household will see their annual bill drop by £426.
It is the first-time prices have fallen since the start of the global gas crisis more than 18 months ago.
However, it is important that households take a meter reading before the drop in the price cap on July 1.
An updated meter reading will stop your supplier from estimating bills that aren’t accurate to the amount of energy you have used.
Taking a meter reading is still important even though bills are dropping, as it will help you if you are disputing a bill in the future.
The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity, so those who use more energy will pay more.
The standing charge – the roughly £300 paid each year by households just to access gas and electricity – has not been included in the cap and will not fall.
Money Saving Expert Martin Lewis welcomed the drop in energy price cap earlier this year.
He said: “This will be a relief for many, yet most will still be paying more for their energy than during the winter.
“This is because, apart from for those with high use, the drop in the rates doesn’t make up for the £66 per month state support people got until April – and most are on monthly direct debit, which means they pay the same in summer as winter.
“Overall, this still leaves people paying double or more what they did before the energy crisis hit in October 2021.
“The fact the state is paying far less than planned to support people’s bills means there is some wriggle room here for targeted support for another hard winter coming for those who are just above the benefits threshold. Though I’m not holding out much hope that it’ll happen.”