Brits could expect to pay less on their bills from July - as Ofgem is set to confirm the new energy price cap within days. There could be a decrease of £1,227 from the April cap, as per predictions made by market analyst Cornwall Insight.
Consumers are not directly affected by the price cap due to the Government’s energy price guarantee (EPG). This limits a typical household’s energy bill to the equivalent of £2,500 per year, reports Lancs Live.
However, starting from July, household bills will revert to the price cap, Cornwall Insight said. Ofgem's announcement will be made on Thursday (May 25).
Which member of the Royal Family are you? Take our quiz
It comes as Government borrowing swelled to £25.6 billion last month amid the cost of energy support schemes, higher benefit payments and rising debt interest, according to new official figures.
Divya Sridhar, economist at PwC, said: "Looking ahead, falling energy prices will provide some relief to public spending. Ofgem’s energy price cap announcement for the summer later this week is expected to reflect energy prices for households falling below the Government’s energy price guarantee threshold for the first time."
To help prepare you for some potential major changes to your bills, the M.E.N has broken down everything you need to know about the upcoming Ofgem announcement.
How is the price cap different to the EPG?
The Ofgem price cap was introduced in 2019 so that the energy regulator could manage energy prices and prevent customers from getting ripped off by energy providers. The cap is set every three months and is based on wholesale energy prices.
In October 2022, in response to wholesale prices soaring sending energy bills through the roof, the government introduced the EPG to help Brits out with their bills. The EPG works in the same way as the cap, placing a limit on how much energy providers could charge customers per unit of energy - but the government subsidises the difference.
That means that as long as the energy price guarantee is lower than the Ofgem price cap, Brits will pay the lower amount, with the government subsidising the rest.
For the last few months, the EPG has been set at £2,500 - so the Ofgem price cap, currently at currently £3,280 a year, has been of little significance to Brits paying their bills. But From July, the EPG is expected to rise to £3,000 and the Ofgem price cap is predicted to fall.
That's good news for households who could end up seeing much smaller bills than they are used to.
When is the Ofgem price cap announcement?
The energy regulator will announce its new price cap evaluation on Thursday, May 25. The price cap it announces will cover energy bills for July 1, 2023 up until September 30, 2023 for household billpayers.
The price cap for bills from October will be announced at the end of August.
How much are energy bills expected to fall by?
The vast majority of forecasters are predicting that energy bills are set to fall. Cornwall Insight predicts the price cap will drop to £2,053.77 a year in July - meaning prices will fall below the EPG for the first time since its introduction in October 2022. The firm also predicts another drop following this in October to £1,975.70.
Both the Ofgem price cap and the EPG are not a maximum limit on how much you can be charged in total for the year. Instead, they use the cost of an average annual bill to place a limit on how much you can be charged per unit of gas and electricity.
That means that if you use much more energy than average, your bill will still be higher. So, households will most likely be charged more or less than the price cap figure depending on how big your household is and how much energy you use.
READ NEXT:
