What will the energy cap changes mean for my bills?

ShareSaveAdd as preferred on GoogleGetty ImagesTypical annual energy bills will rise by £221 to £1,862 from 1 July, the regulator Ofgem has announced. The 13% increase in the energy cap affects millions and reflects soaring wholesale oil and gas costs caused by the US-Israel war with Iran. The energy cap fixes the maximum amount which customers on standard variable tariffs can be charged for each unit of gas and electricity used. It covers around 33 million households in England, Wales and Scotland and is set by the regulator Ofgem every three months. The typical annual usage figure applies to the first category: dual-fuel households on a standard variable tariff which pay by direct debit. Between 1 July and 30 September, their gas prices will be capped at 7.33 pence per kilowatt hour (kWh), up from 5.74p. Electricity prices will be capped at 26.11p per kWh, up from 24.67p. It means that a typical household will pay £1,862, up from £1,641 between 1 April and 30 June. But customers' actual bills depend on the amount of energy used and how they pay for it. The typical annual bill from 1 July for customers who pay by standard credit will be £2,005, up 13% from £1,772. The typical annual bill from 1 July for prepayment customers will be £1,812, up 13% from £1,597. Ofgem regulates the energy market in England, Scotland and Wales. Northern Ireland has a separate system. Although the price cap sets the unit prices for gas and electricity, your household's actual bill depends on the overall amount of energy you use, and how you pay for it. Where you live, the type of property you have, how energy efficient it is, how many people live there, and the weather all make a difference. The Ofgem cap is based on "typical" household energy use in a year with a single bill for gas and electricity settled by direct debit. The vast majority of people pay their bill this way to help spread payments across the year. The regulator has previously calculated that a "typical" household uses 11,500 kWh of gas and 2,700 kWh of electricity in a year. However, it is reducing this "typical" energy use because many households have cut back due to high prices in recent years and are benefiting from improvements in energy efficiency. Its new estimates assume annual use of 9,500 kWh of gas and 2,500 kWh of electricity. Using these numbers the typical average bill from 1 July would be £1,663. On this basis, typical annual bills for dual fuel direct debit households under the current energy cap would be £1,490. That means the 1 July figure is a 12% increase, similar to the 13% rise under the previous assumptions. Ofgem previously changed its consumption estimates in 2019 and 2023. Ofgem also controls standing charges, which are a fixed daily fee to cover the costs of connecting households to gas and electricity supplies. These vary slightly by region and payment method. Between 1 July and 30 September 2026, average standing charges for direct debit customers will be 57.19p a day for electricity and 29.04p a day for gas. These are largely unchanged from the amounts charged in the previous three-month period. Campaigners have long argued that standing charges are unfair because they make up a bigger proportion of the bill for low energy households. In response, Ofgem said it wants all energy firms to offer at least one tariff that has a low standing charge but higher cost per unit of energy. The regulator said this would give some customers more choice and control but acknowledged it would not be suitable for everyone. Charities, campaigners, and the suppliers' trade body criticised the proposal for just shifting the cost from one part of the bill to another rather than cutting it. Submitting a meter reading when the cap changes means you are not charged for estimated usage at the wrong rate. This is especially important when prices go up. Customers with working smart meters do not need to submit a reading as their bill is calculated automatically. Ofgem's interim chief executive Tim Jarvis told the BBC the energy price disruption caused by the ongoing Iran war could last longer than initially thought. Global energy costs have rocketed since the US and Israel attacked Iran on 28 February. In response, Iran has effectively blocked the crucial Strait of Hormuz shipping route south, which normally carries a fifth of the world's oil and gas. Jarvis said the level of the next cap, which will take effect on 1 October, largely depends on whether a peace deal can be agreed and how quickly the strait can reopen. Most households use more energy in the winter months, so an increase in the cap at that time of year is very significant. The regulator will announce details of the next cap by 26 August. Around 40% of households (21 million) have fixed-term energy deals. They are not affected by changes to the energy cap because their price will not move until the end of their tariff. Fixed deals certainty for a set period

What will the energy cap changes mean for my bills?

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What will the energy cap changes mean for my bills?

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