Bussiness
What is happening to gas and electricity bills? – BBC News
Gas and electricity bills will fall by an average 7% in England, Scotland and Wales on 1 July.
The new energy price cap means the typical annual bill paid by direct debit will fall to £1,568 per year.
However, while bills will be at their lowest for two years, they remain about £400 higher than three years ago.
What is the energy price cap?
The energy price cap covers 28 million households in England, Wales and Scotland and is set every three months by the energy regulator Ofgem.
It fixes the maximum price that can be charged for each unit of energy on a standard – or default – tariff for a typical dual-fuel household which pays by direct debit.
From 1 July until 30 September, gas prices will be capped at 5.48p per kilowatt hour (kWh), and electricity at 22.36p per kWh.
How much is my bill likely to go down?
That is a fall of £122 compared to the annual bill on charges between April and June.
Those who pay their bills every three months by cash or cheque will pay more, with a typical bill of £1,668 a year.
What is a typical household?
Your energy bill depends on the overall amount of gas and electricity you use, and how you pay for it.
The type of property you live in, how energy efficient it is, and how many people live there, are also relevant.
The Ofgem cap is based on a “typical household” using 11,500 kWh of gas and 2,700 kWh of electricity a year with a single contract for gas and electricity, which they pay by direct debit.
The vast majority of people pay their bill this way, to help spread payments across the year.
Those who pay every three months by cash and cheque are charged more.
What is happening to prepayment customers?
From 1 July households on pre-payment meters will pay slightly less than those on direct debit, with a typical bill of £1,522.
Since April they have paid the same as those on direct debit, but were previously charged more.
About four million households had prepayment meters in July 2023, according to Ofgem.
Many have been in place for years, but some meters were installed more recently after customers struggled to pay their bills.
New rules mean suppliers must give customers more opportunity to clear their debts before switching them to a meter, and they cannot be installed at all in certain households.
Image source, Getty Images
What are standing charges and how are they changing?
Although the overall cap has fallen, standing charges – a fixed daily amount which covers the costs of connecting to a supply – are unchanged.
Standing charges are 60p a day for electricity and 31p a day for gas, although they vary by region.
Ofgem said tens of thousands of customers responded to its recent consultation about how standing charges work.
The regulator is also adding £28 to everyone’s bill over the year to cover the cost of dealing with £3.1bn of debt that customers owe to suppliers.
Should I fix my energy prices?
The fall in energy prices raised hopes that suppliers would offer cheaper, fixed-price deals.
These offer certainty for a set period, but if prices drop further, people could find themselves stuck at the higher price.
Analysts at the consultancy Cornwall Insight have forecast a rise in the typical bill to £1,762 in October, staying at that level in January. However, forecasts are not always correct and may change owing to events.
When considering switching to a fixed-price deal, Ofgem says people should seek independent advice and “consider what is most important for them, whether that’s the lowest price or the security of a fixed deal”.
Price comparison website Uswitch says it expects “increased competition” from suppliers, but warns that people to check any exit fees if they want to leave a fixed deal early.
What support is available for energy bills?
But much of that extra support has now finished.
The £500m Household Support Fund, which the government introduced to help vulnerable households with costs in September 2021, had been due to end in March 2024.
The government’s Fuel Direct Scheme can help people to repay a debt from their benefit payments.
In addition, energy suppliers must offer customers affordable payment plans or repayment holidays if they are struggling to pay bills.
Most suppliers also offer hardship grants.
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