Ofgem is to make an announcement within days that will set the new price of your gas and electricity - with analysts saying your bills should come down. Energy bills are currently covered by the Energy Price Guarantee (EPG) which is set at £2,500 a year for the typical household paying by direct debit.
This replaced the Ofgem price cap which was set at £3,280 a year. Cornwall Insight today is currently predicting the Ofgem price cap will drop to £2,063 a year in July - knocking almost £500 a year off your bills.
If this happens, then prices will fall below the EPG for the first time since it was introduced in October 2022. Cornwall Insight then expects a slight rise to £2,098 a year from October, reports The Mirror.
Ofgem will announce its price cap for July 1 to September 30 next week on Thursday, May 25. The Ofgem price cap stood at £1,277 in October 2021, before it rose to £1,971 in April 2022.
The price cap sets a limit on how much you can be charged per unit. So the more gas and electricity you use, the higher your bills.
Ofgem, short for the Office of Gas and Electricity Markets, is the regulatory authority for the gas and electricity markets in Great Britain. It was established in 1999 as part of the Gas Act and the Electricity Act to protect the interests of consumers in these markets. Ofgem's main responsibilities include promoting competition, setting price controls, regulating network operators, and ensuring the security and sustainability of the energy supply.
One of the significant functions of Ofgem is the implementation of price controls, which include the introduction of the price cap. The price cap is a regulatory mechanism that sets a limit on the maximum price that energy suppliers can charge for their standard variable tariffs (SVTs) and default tariffs. SVTs are the default plans that customers are automatically placed on when their fixed-term energy contracts end or if they have not actively chosen a specific tariff.
The introduction of the price cap aims to protect consumers from overpaying for their energy and to promote fairer pricing. It helps ensure that energy prices remain affordable and reasonable for customers who have not switched to a better deal or negotiated a competitive rate. The price cap is reviewed and adjusted by Ofgem twice a year, in April and October, based on factors such as wholesale energy costs, network costs, and policy costs.
It's important to note that the price cap does not apply to all energy tariffs. Fixed-term tariffs, prepayment tariffs, and green tariffs are typically exempt from the price cap. Additionally, the price cap does not guarantee the cheapest energy prices but rather sets a maximum limit on the prices that suppliers can charge for default and standard variable tariffs.
The specific details and calculations for the price cap can vary over time, so it's advisable to consult Ofgem's official website or reliable sources for the most up-to-date information on the price cap and related regulations.
