What happens to energy prices in October 2023? The new Ofgem price cap explained and how it affects bills
On 1 October the new energy price cap will fall by 7 per cent, dropping to £1,923 a year for the average home.
This is reduction of £151 from the current level of £2,074.
However, it is worth remembering that the energy cap limits the unit cost of gas and electricity and standing charges and not the total bill.
What is the price cap?
The energy price cap is set by Ofgem, the body that regulates energy suppliers in Great Britain.
This cap limits the maximum amount energy suppliers can charge you for each unit of energy you use.
It was introduced in 2019 as there was concern people were paying too much for their energy.
The price cap is currently reviewed every three months by Ofgem to “reflect changes in underlying costs as well as inflation,” it says.
Due to soaring wholesale energy prices, the Government brought in an extra measure – an energy price guarantee – which ran from 1 October 2022 until 30 June 2023.
This provided a support rate discount to all households with gas or electricity, bringing it down to around £2,500 per year.
However, since July the price cap is now the scheme limiting bills once again. It only applies to variable tariffs and not fixed ones.
How will the new energy price cap affect bills?
The new energy cap will mean the average weekly cost for a family to use a washing machine will go down 12p (assuming six washes a week), and using a tumble dryer will be 42p cheaper per week.
Homeowners will be paying £1.11 less a week – and £53.36 a year for using the most popular appliances – the oven, washing machine, fridge, TV, tumble dryer and dishwasher.
However, this still does not compare favourably with before the pandemic – the average household is spending £125.88 more now compared with 2019.
What can we expect in the new year for energy bills?
i reported that despite the new cap, forecasts show energy bills are expected to increase early next year.
According to a new report by analysts at Cornwall Insight, annual energy bills for a typical household are expected to rise by £73 in January.
It predicts bills could increase to £1,996 under regulator Ofgem’s cap largely because of increases in wholesale energy prices.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “It shows we cannot just assume prices will continue their fall and eventually reach pre-pandemic levels.
“Policies need to be put in place to deal with the possible situation that high energy prices have become the new normal.”
