Expected energy price cap cut will drive bills down

A significant drop in domestic energy bills in July will be confirmed later when the regulator sets the next price cap in England, Wales and Scotland.

Analysts predict that Ofgem’s decision will mean a £450 drop in a typical household’s annual gas and electricity bill, to around £2,050.

It will mark the end of a government guarantee which, since October, has capped the typical bill at £2,500.

It could also signal the return of competition to the market.

Fixed offers have all but disappeared as an option for customers, but there is a widespread expectation that people will be able to shop around again and switch to the provider that offers the best deal.

However, consumer groups have warned that it might not be best for everyone, especially given uncertain future costs.

“We expect consumers to make some choices again,” said Emily Seymour of consumer group Which? “However, it will depend on where energy prices go next.”

Analysts predict that the typical annual bill, if affected by the price cap, will remain around £2,000 a year for the rest of the year. However, earlier this week, Qatar’s energy minister warned that “the worst is yet to come” over gas shortages in Europe, suggesting that prices could rise again.

Ofgem’s energy price cap sets the maximum price per unit of gas and electricity that can be charged to households at fixed or variable rates in England, Wales and Scotland.

Since October, it has been replaced by the government’s Energy Price Guarantee, which meant that a typical household’s annual gas and electricity bill was £2,500, but it will expire at the end of June. A £400 discount on everyone’s energy bills, provided by the government over the winter, ended in April.

Although the typical bill will drop to around £2,000 a year in July, it will still be much higher than it was in winter 2021, when it stood at £1,277 a year.

Most homes do not use a typical amount of gas and electricity. Bills are based on the amount of energy a home actually uses, which depends on the number of people, the type of property, and its energy efficiency.

People paying by direct debit will have to wait and see if their provider lowers the monthly demand and should watch out for any credit that may accumulate. Prepaid customers will have a limit set at the same level, but those who pay by cash, check or bank transfer, usually every three months, will have to pay more.

Power is regulated separately in Northern Ireland, where bills will remain at £1,950 per year for the average household.

Commenters say many households bought into the message to reduce energy use when bills were high last winter, sometimes out of necessity and sometimes by choice. They said that if that continued, it would help reduce household bills, especially if people used the summer to make changes.

Here are some energy-saving ideas from environmental scientist Angela Terry, who created One Home, a social enterprise that shares green tips for saving money.

Some people have taken the opportunity to improve their homes and habits to better manage their energy use. When Tim Phillips moved into his home near Cambridge, he said it was a “pleasant surprise” that the newly built property had solar panels on its roof.

He began a journey that now sees him using cheaper energy at night to charge a battery in his garage, as well as his electric car. That power bank is then used to power his appliances during the day, when his variable rate would have charged more.

An “energy brain” – a small computer with the dustpan and brush in the downstairs cupboard – also helps keep costs down, drawing excess power from solar panels and using it to heat water.

It keeps a close eye on your home screen, telling you when something is drawing a lot of power. That may be the oven, for good reason, but it could also be that an appliance has been left on unnecessarily.

“It’s a system that makes me more aware of what I’m wearing,” he says. “It gives you freedom, instead of being a slave to it.”

Some of the kit involved comes from a Cambridgeshire-based company called Geo, which stands for Green Energy Options. His argument is that far from being a house of the future, small pieces of technology such as a smart thermostat may only cost around £20 to £25, but they cut energy bills by 20% or more.

You can automate simple actions like turning off the heating when it detects that no one has been home for a while. It has the potential to be linked to smart plugs or voice assistants around the house.

Steve Cunningham, Geo’s chief executive, said the energy management systems could generate hundreds of pounds of savings. “We are working hard to transform the value that smart meters bring to homes across the country,” he said.

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