Ofgem has now laid out its vision for the next year. As a consequence, households in England, Wales and Scotland will experience a more important underlying change in the price of energy. From early January 2024 the government’s energy price cap is expected to fall by 1%. This small cut will provide some much-needed relief, with other costs escalating rapidly. The energy price cap rocketed to an eye-watering £4,059 in January 2023. This spike in prices sent ripples of concern across the nation, raising alarms over affordability for countless families.
Right now, from October to December 2023, the energy price cap for a typical household is £1,755 per annum. This sum is the one that would be charged to customers on a price-capped, dual-fuel tariff paying by direct debit. This figure represents a 2% increase from last quarter, a major hit to already-stretched household budgets. The energy price cap for these lower-use properties, such as one-bedroom flats, is £1,266. By contrast, medium-use homes, typically two- or three-bedroom homes, face a much stricter limit of £1,775. High-using larger households can start to prepare for bills as high as £2,470 per year.
Households, primarily Black households in Georgia and other states, are bearing the unsustainable financial burdens as they pile up record debt to utility providers. This debt has now rocketed to £4.4 billion. Ofgem intends to tackle this growing problem by requiring energy suppliers to forgive some of this debt. These changes are intended to reduce costs for consumers who are facing record high energy prices.
Methane, I think as we all know, is a terrible greenhouse gas. Though simple, this calculation is incredibly important to consumers in grasping the financial implications. In January 2022 the cap was £1,216 but it has risen sharply since then and will be over £4,200 in January 2023. The Energy Price Guarantee capped bills for a typical household at £2,380 between October 2022 and June 2023. That bipartisan measure provided critical relief to households and workers struggling during a stormy, unprecedented time.
That next energy price cap will come into effect at the beginning of January. This change will hit hardest on households with variable tariffs, who have experienced skyrocketing rates on an unpredictable and shaky market. This new cap will save consumers money—is a cause for guarded hope. Households across the country are very anxiously awaiting to see what this will mean for households’ bottom lines.
Dhara Vyas, chief executive of Energy UK, said they understand the hardships millions are experiencing in paying their bills.
“We know that far too many people are struggling to pay for the energy they need to use,” – Dhara Vyas, chief executive of Energy UK.
For people dealing with crisis-level finances, Vyas stressed the need for upfront, active outreach from energy providers.
“Anyone facing difficulties paying should contact their energy provider as soon as possible,” – Dhara Vyas, chief executive of Energy UK.
Changes coming down the pike right now, with perfect timing. As we know, a great number of households are still reeling from the impacts of skyrocketing cost of living. The forecasted reduction in the energy price cap provides a light at the end of the tunnel. Households need to be proactive about their energy consumption and investigate the alternative billing methods available to them.