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Ofgem energy price cap is lowered by £1,000

Energy prices have soared over the last year, increasing the already significant cost of living crisis in the UK. Today, a new Ofgem energy price cap of £3,280 from April 1st was announced, a decrease from the previous cap of £4,279.

The numbers and figures announced in the news aren’t always the easiest to understand – and the main question most people will have is how this new cap will affect their energy bills.

Our aim in this blog is to help make these changes a little clearer for you, so you have a better idea of where you stand with your energy bills.

In this section (Ofgem energy price cap is lowered):

Ofgem is a (non-government) department in charge of regulating energy providers, to make sure the prices they charge are fair. The name Ofgem stands for the Office of Gas and Electricity Markets.

They review the prices charged by companies every 3 months and adjust what is known as the ‘energy price cap’. This is a set amount that energy suppliers can’t exceed when charging customers for energy and gas.

What is the new Ofgem price cap?

Over the last 3 months, the Ofgem energy price cap has been set at £4,279 if you pay for your energy via direct debit. This will be decreased to £3,280 as of April 1st 2023.

The amount you pay for your energy can vary if you are not paying via direct debit.

  • If you pay via cash or cheque, your new price cap will be £3,482 (previous cap £4,533)
  • If you pay via prepayment meter, your new price cap will be £3,325 (previous cap £4,358)

The difference in pricing is due to additional costs to the supplier from process cash/cheques/prepayments compared to direct debit payments.

Will energy bills be lower as the Ofgem energy price cap is lower?

Although the energy price cap amount is now lower, this doesn’t mean your bills will automatically be lower.

The energy price cap prevents suppliers charging unfair amounts, so one supplier is not able to charge hundreds more per year compared to others.

How will my household be affected by the Ofgem announcement?

Currently, most UK households are benefitting from the government’s Energy Price Guarantee (EPG) which allows suppliers to lower their bills (and the government will repay the suppliers the difference).

This means that households using an average amount of energy will be paying around £2,500 a year for their energy. This is set to increase by £500 per year to £3,000 as of the 1st of April.

What is the government Energy Price Guarantee (EPG)?

The Energy Price Guarantee was put in place by the UK government and acts as a discount on your energy bills. This stops suppliers charging more than £2,500 per year for standard energy usage (you could still pay more than this if you use more energy).

What should I do if I can’t afford my energy bills?

The thought of higher energy bills is understandably worrying, particularly if you are already struggling with rising costs. There are a few things you can do if you are concerned you won’t be able to afford higher pricing:

It is also worth considering if your home and family is as protected as it could be. It may seem counterproductive to add an additional monthly payment when trying to save.

However, a policy like income protection insurance or critical illness cover could provide crucial financial support if you were to suddenly become ill and unable to work and pay bills as normal. With the cost-of-living crisis looking set to continue indefinitely, it is a good idea to protect yourself in the event something like this happens.

If you need advice about any insurance policies, our FRIENDLY experts can offer FREE advice for how to safeguard your family’s finances – without adding a massive monthly bill. You may find cover is far more affordable than you would think, provided you get the right advice.

Resources

Gov.uk – Energy Price Guarantee

Citizen’s Advice – Getting extra support from your energy supplier

Citizen’s Advice – Your energy supply

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