What is the energy price cap, and how does it affect you?

Energy suppliers are being forced to pay more on the wholesale market meaning household bills are on the rise. This rise in energy costs are having a huge impact on people around the world. So, as the cost of energy increases, what does that really mean for homeowners and what is the government doing to help? 

Ofgem Price Cap

The Ofgem Price Cap sets a maximum cost that suppliers can charge people per kWh (Kilowatt hour) of energy they use. This cap was calculated by Ofgem (Office of Gas and Electric Markets) who are an independent National Regulatory Authority, who regulate energy suppliers. The cap ensures that the profit in which energy suppliers can make, is now capped.

 Did you know, most suppliers don't generate their own energy?

Suppliers purchase energy on the wholesale market which they then sell on to homeowners at an increased rate (to earn profit). As the costs on the wholesale market have skyrocketed, this means the average household energy bill has also increased substantially. 

The Ofgem Energy Price cap increased to £4,279 per year from the 1^st of January and will remain in place until 31^st March 2023. It’s worth noting; £4,279 is based on a typical household consumption with dual fuel electric and gas, paying by direct debit. Homeowners will pay more, or less, than the £4,279 depending on their own energy usage and tariff.

Energy Price Guarantee (EPG)

The energy price guarantee (EPG) is additional protection for households and consumers which has been put in place as a temporary measure. The EPG is there to protect consumers from the huge increases in costs of energy, so they don’t have to pay the whole cost under the original Price Cap. So, instead of households paying approximately £4,279 per year on energy bills (based on a typical household as explained above) they will now only pay approximately £2,500 annually, with the government paying energy suppliers the difference. This additional support began on the 1^{st of} October 2022 and will last until April 2024.

To find out more about the Energy Price Guarantee and how it relates to your specific tariff, you can visit the official Gov website here.

Energy Bill Support Scheme

The Energy Bill Support Scheme provides a £400, non-repayable discount to all eligible households with a domestic electricity connection across England, Scotland, and Wales.  

The discount will be shared over 6 months starting in October 2022. In October and November, you should have received £66 from your supplier, with the remainder of the months receiving a £67 payment. If you are on a traditional pre-payment meter, you are also entitled to this discount but will receive it in the form of vouchers which you will need to redeem yourself.  

It doesn’t stop there!

There is clearly a range of support from the government to help households with the cost of energy, however, these schemes will not last forever. There are many other ways in which you can save money on your gas bills. You can read 20 top tips to save money on your gas bills in our recent blog here.

One of the best ways to save on your heating bills is by installing an energy efficient boiler. If you want to know what energy efficiency means, you can do so here. An energy efficient boiler can maximise the energy you pay for (the fuel it burns) which in turn lowers your bills whilst also reducing carbon emissions too! The iC Economiser is one of the most efficient boilers on the market and is a whopping 7% more efficient than most leading brands*.

Related Reads:

The Most Efficient Boiler: Gas vs. Electric 

For more information about energy efficiency click here