What is the new energy price cap and what does it mean for my bills?

Global events can have a drastic effect on energy prices in the UK.

As energy costs skyrocketed after Russia’s full-scale invasion of Ukraine in February 2022, the cap reached its worst level yet at £4,279.

This fell back to £2,500 thanks to the government’s emergency Energy Price Guarantee in a bid to alleviate spiralling cost of living pressures.

Households soon faced a typical annual bill of £3,280 before it was reduced to £2,074 last July.

It fell even further to £1,568 this July, but household bills are rising again after Ofgem set a new energy price cap of £1,717 for those paying with direct debit.

Households paying bills by cash or cheque every three months face a cap of £1,829.

You could find yourself paying more than this, however, as the cap isn’t an actual limit on bills.

It’s an estimate of what the typical household is expected to pay per unit of gas and electricity, so the more you use, the more you pay.

From October 1 to December 31, gas prices are capped at 6.24p per kilowatt hour (kWh), while electricity has a cap of 24.50p per kWh.

Should I take a meter reading?

Expert advice is to submit a meter reading when prices rise.

Taking a reading later means you could be charged a higher rate for energy used before the price increased.

Can I fix my energy tariff and what is happening to prepayment customers?

You can opt into a fixed-price deal that gives you more certainty about what your energy bills will be for a set period.

But you face the downside of missing out on potential savings should energy prices drop, and you may have to pay an exit fee if you want to leave the deal.

Prices could fall by 1% in January, bringing the average household energy bill down to £1,697 a year.

Given the volatility of energy markets, you can’t bank on that actually happening when prices could rise – or fall further – instead.

Households on prepayment meters often face higher prices than those who pay through direct debit.

Now they’re in for some luck with a lower typical bill of £1,669, an increase of £147 from the last energy price cap.