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Sam Bromley
Adam French
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The Ofgem price cap fell from £1,690 to £1,568 on 1 July 2024. This cap will be in place until 30 September.
If you’re an average energy user your bills are at their lowest since the Russian invasion of Ukraine in early 2022. However, July’s cap is still around £400 higher than levels seen before the coronavirus pandemic.
Since January 2024, Ofgem has calculated the price cap using revised typical energy usage values. These have changed from 2,900 kWh to 2,700 kWh for electricity and 12,000 kWh to 11,500 kWh for gas.
One reason for this change could be that households have become more energy efficient. But it also reflects that many households have been limiting energy usage, in an attempt to combat rising prices.
Importantly, the price cap isn’t a total limit on your bill, and instead it limits the unit cost of energy. The more you use, the higher your bills will be.
So are energy prices going down further in 2024 and is now the right time to fix?
Why are energy prices so high?
Our energy bills have been high because wholesale gas prices – the amount energy suppliers pay for gas – have skyrocketed.
The coronavirus lockdowns, cold winters, and geopolitical issues, such as Russia’s invasion of Ukraine in early 2022, are just some of the factors that have driven up the cost of energy.
Because wholesale gas prices increased so much, suppliers had to pay more for energy.
Suppliers pass on these higher costs to households by increasing how much they pay for the energy they use. However, there was a limit to how much they could pass on to customers because of the Ofgem energy price cap and, more recently, the Energy Price Guarantee.
While wholesale energy prices largely went down throughout 2023, they were still high compared with previous years. And Ofgem increased the price cap in January 2024, because the cost of wholesale gas went up again due to world events, such as the conflict in the Middle East.
When does the energy price cap change?
The energy regulator Ofgem sets the energy price cap. It aims to ensure that customers are charged a fair price for their energy. It is reviewed every three months and any changes come into force in January, April, July and October.
The cap is the maximum suppliers can charge households for each unit of gas and electricity used. It only applies to variable and prepayment tariffs, not fixed-rate tariffs.
From 1 July to 30 September, the price cap for a typical household paying by direct debit is £1,568. Your actual bill will vary depending on how much energy you use, where you live and how you pay for your energy.
This cap only applies to England, Wales and Scotland. In Northern Ireland, the energy market works differently and there is no equivalent price cap.
Be aware that the price cap is not the maximum you can pay for your energy. It limits the cost of each unit of gas or electricity you use, not your total bill.
What is the cap if I’m on a prepayment tariff?
The price cap for prepayment customers has fallen from £1,643 to £1,522 for July to September.
Ofgem has ensured that prepayment customers who get their gas and electricity from the same supplier will continue to pay less than direct debit customers. Standing charges have been reduced for prepayment customers to achieve this saving them around £49 a year, while direct debit customers will pay £10 more a year.
Are energy prices going down?
Rather than going down again, Cornwall Insight, the independent energy analyst, believes energy prices could go up in the last quarter of 2024.
Based on wholesale prices for energy as at 24 June 2024, Cornwall Insight predicts that the price cap could sit around £1,723 from October 2024.
Cornwall Insight also predicts that the cap for the first quarter of 2025 will remain at a similar level to the October cap.
Ofgem can reduce the price cap when wholesale energy prices fall – the drop in the price cap from July 2024 reflects lower wholesale energy prices paid by suppliers. On the other hand, a rise at the end of 2024 would reflect higher wholesale energy prices.
Should I fix my energy deal?
With the price cap falling over the last 12 months, more suppliers have started offering fixed-rate tariffs for both new and existing customers. Some tariffs may even be cheaper than the current level of the price cap.
But fixing comes with caveats. For example, not every tariff will be available to new customers, meaning you may have to be with the supplier already to fix your prices.
Fixing could also come with additional fees or requirements, such as taking out an extra service with the provider or managing your account online.
Whether you fix or not will usually come down to personal preference – for example, if you want to have certainty over your payments each month.
With Cornwall Insight predicting that the energy price cap could rise again from October, and stay at a similar level in 2025, it may be a good time to look into the fixes available to see if any are worth considering. Make sure you check the terms of the tariff and any exit fees that may apply.
As a rough rule of thumb, if you’re offered a tariff at a lower or similar level to the July price cap, then it may be worth considering if you prefer to know exactly what you will pay for your energy each month.
However, any savings may be slim, and with the Ofgem price cap changing every three months typical bills could change quickly. If energy prices fall rather than rise, you may be locked into paying more for your energy than if you had stayed on a variable tariff, or waited for a more competitive fixed-rate tariff. With fixed tariffs typically lasting 12 months, you need to consider how prices might move over the entire year – and because the wholesale energy market remains volatile, there’s no easy answer.
If you’re already locked into a fixed deal that’s more expensive than the price cap, it may be worth seeing if you can switch to a cheaper variable tariff or a cheaper fixed deal. But, if you do decide to leave your current fix, check if you need to pay any penalty fees.
» MORE: Types of energy tariffs explained
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What if I can’t afford my energy bills?
While inflation has slowed and recently reached the Bank of England’s 2% target, the energy price cap is still higher than it was before the coronavirus pandemic.
With the finances of many families stretched to their limits by the cost of living, some may have struggled to build an emergency fund to help them weather financial shocks.
If you’re able to, cutting down on your energy use could help you to save some money on your bills. But it’s possible that cutting down isn’t an option. If you’re finding it difficult to pay your energy bills then you should ask for help as soon as possible.
You can contact your energy supplier to say you are struggling to afford your bills, and you may be able to arrange a new payment plan. If you can’t come to an agreement and you pay for your energy by direct debit, your supplier may want to switch you to a prepayment tariff.
Some energy suppliers offer grants and hardship funds, as well as advice, so it’s worth seeing if you are eligible for any support from your provider.
While closed at the moment, there are government schemes available that support those in need throughout the winter, including:
- Warm Home Discount
- Winter Fuel Payment
- Cold Weather Payment
There may be some local grants available too, so check with your local council to see if it can offer any support.
» MORE: Help if you can’t afford your energy bills
If you are struggling with your finances and debts, you can also contact charities for help and advice, such as:
» MORE: How debt charities can help
Image source: Getty Images
Dive even deeper
How Does the Energy Price Cap Work?
The energy price cap is set by energy regulator Ofgem. It doesn’t cap bills but instead limits how much energy providers can charge consumers for the units of energy they use.
42 Energy Saving Tips: How to Save Energy At Home
Saving energy doesn’t need to be complicated. There are some simple ways you can reduce your energy usage and save money on your energy bills, including using LED bulbs and switching suppliers.
How to Get Help With Your Energy Bills
If you’re finding it difficult to pay your energy bills, you may be eligible for government grants or support from your energy supplier. Find out what schemes are available to help you pay for your gas and electricity.