The energy price cap may have fallen to £2,074 a year, but the reality is that the drop will make very little difference to most households struggling to pay their gas and electricity bills.
Although the cap, which was set by Ofgem on Thursday May 25, has dropped a headline-grabbing £1,206 from the current cap of £3,280, the EPG limits the average household bill to £2,500. And households will still face sky-high heating costs this winter because the Government's Energy Price Guarantee (EPG) and Energy Bills Support Scheme (EBSS) have come to an end.
The EPG coupled with the £400 EBSS paid to most households last winter meant that the average family paid £2,100 for their annual bills. So the new price cap at £2,074 a year will only save the average family £26 per year. This means that the average household will continue to pay almost double the rate for their gas and electricity than before costs started to soar in late 2021. Before then, the typical household paid £1,271 a year.
Read more: Confusion as £400 energy bills support for households comes to an end
Charities have warned households not to expect big drops in their energy bills this winter. Simon Francis, a coordinator at the End Fuel Poverty Coalition, told The Guardian: “The sting in the tail to this announcement is that customers are still going to be paying roughly the same for their energy as last winter. And after months of inflation and the wider cost of living crisis, people are even less able to afford these high energy bills.” and fuel poverty campaigners at National Energy Action have warned that most households are unlikely to feel any better off, and said that about 6.5 million households will remain in fuel poverty despite the lower rate.
Households will also face being charged an extra £10 a year on their energy bills from October under plans put forward by the regulator alongside the new cap. Ofgem has proposed increasing the amount of profit suppliers can make from 1.9% to 2.4% to prevent them going bust, because the cost of bailing out a failed supplier would be higher.
Are you struggling to make ends meet in the cost of living crisis? Join in the conversation below
Jonathan Brearley, the chief executive of Ofgem, said that households were “unlikely to see prices return to the levels we saw before the energy crisis” in the medium term. "After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction," he said. "However, we know people are still finding it hard, the cost of living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds."
Now read:
- Energy bills could rise £30 for households to cover cost of customers who avoid paying
- Little-known way to slash your water bills by up to 50% a year
- Experts warn of cost pitfalls if you fix your energy prices too soon
- Warning as families face bills to replace broken smart meter displays
- Energy supplier to wipe debts after payment glitch left customers with shock bills
