The energy regulator Ofgem has announced that the price cap will decrease to £1,923 for Direct Debit customers on a standard variable tariff from 1 October 2023. This keeps the price cap below the government’s Energy Price Guarantee (EPG) meaning that residential customers' bills will still be determined by the price cap.
Ofgem’s October 2023 price cap has been announced, so we thought it would be the right time for a quick refresher. Understanding your energy prices can feel confusing, especially over the past year when there have been so many changes. That’s why we’ve broken it down for you. Plain and simple.
What is the price cap?
Simply put, the price cap is the maximum price per unit that your energy supplier can charge you for your energy. It also includes the maximum they can bill you for your standing charge too. The price cap figure is an average, you will pay more or less depending on your energy consumption.
The government introduced the price cap in 2019. It is set by the energy regulator Ofgem and reviewed four times a year.
What is changing in the October 2023 price cap?
Ofgem has announced the price cap is changing on 1 October 2023. Unit rates will decrease for all customers. Standing charges vary depending on the method of payment and the region you live in, but will increase slightly for all customers. Overall, the price cap will decrease to £1,923 per year for an average household.
Currently, the price cap is set at £2,074. This came into effect on 1 July and will end on 30 September 2023.
This means that from October customers on SVT will see their energy unit prices decreasing.
How will the October 2023 price cap affect your bills?
Between October 2022 and June 2023 the price cap did not determine your domestic bills. The government brought in the Energy Price Guarantee (EPG) to protect customers from rising bills. The EPG was set at £2,500 until 30 June 2023. With Ofgem’s July price cap dropping below the £2,500 EPG level the government support is no longer in effect. Meaning that customers' prices are once again determined by Ofgem’s price cap. The government raised the threshold of the EPG to £3,000 from 1 July 2023. With October’s price cap set to fall further below the EPG it will be the price cap that continues to determine your energy prices.
The Energy Price Guarantee is a discount on consumer energy prices that aims to keep the average household bill below £3,000 a year (£2,500 between October 2022 and June 2023) to reduce the impact of recent rises in wholesale energy costs.
The price cap is calculated based on multiple factors that make up the cost of supplying your energy. However, wholesale energy prices are usually the main one that affects changes. In fact, wholesale prices are responsible for around 75% of the cost of the average energy bill (on tariffs equal to the price cap)*.
What makes up the price cap:
Wholesale prices. These are prices that suppliers like us typically pay when buying gas or electricity to supply our customers. The supplier purchases energy for their customers on the wholesale market far in advance of when they need to supply that energy to you.
Adjustment allowance. This is an allowance for any unexpected extra costs that may arise, such as from supplier failures.
Operating costs. These represent the costs to your supplier to deliver its services to you. They include sales, metering, billing, and general customer service costs.
Network costs. These costs are for maintaining, running, and upgrading the gas pipes and electricity cables that carry energy across the country into your home or business. Network companies charge your supplier an Ofgem-regulated price for using the energy network.
Policy costs. These costs relate to government led social and environmental schemes, such as the Feed in Tariff and Renewable Obligations schemes which are designed to help reduce emissions, save energy and encourage the transition to renewable energy.
VAT. Value Added Tax is set at 5% for energy bills.
Payment method costs. Ofgem have set a Payment Method Uplift, to account for the additional costs associated with providing service to customers who don’t pay by Direct Debit. This is also why it is often cheaper to pay for your energy by Direct Debit.
Smart. The Government is committed to making sure all households and small businesses can benefit from smart meters as soon as possible. The smart meter rollout allowance was introduced in June 2020, to help cover the cost of supplying them to customers. Interested in getting one in your home? Learn more about the benefits of smart meters and book your installation.
Headroom allowance. This is a small extra allowance for uncertainties in the costs incurred by suppliers.
Earnings. Ofgem accounts for a fair rate of return for energy suppliers within the price cap. This makes up around 2% of the average bill*.
Contact our Energy Specialists if you’re having difficulty.
Our Energy Specialists are here to help you if you’re concerned about your energy bills or need advice with moving. If you’re struggling to pay, please visit our help page to find out more about how we can support you. You can reach out to our Energy Specialists for personal advice on Facebook and Twitter.
Feel the Community power.
The E.ON Next Community is a space for customers just like you, sharing their experiences to offer a helping hand. Find support or suggest your own unique topics, plus get involved in discussions of all the latest news. Join the conversation now.
As with every diverse community, there is always a mixture of opinions, knowledge as well as understanding - that’s what makes it such a great place to be! To make sure everyone gets the most out of our Community and feels good doing it, we’ve created some values below on how to be an awesome, positive member. So, take a read and then go for it!
We love having you all here in the Community and really hope you find some great advice and help from our other amazing members. As a community team, our main role here is keeping things ticking over, everyone safe and getting involved in some great conversations! We know many of you will have specific queries about your accounts and we want to keep your personal details safe so please don't post them here.
• Saying thanks goes a long way
• The community is a public website, so be careful
• Be kind, respectful and supportive
• It's a family-friendly community
• If you’re in a specific section or discussion, try to stay on topic
• One post is normally enough
• Be cool, don’t spam
We want to ensure that the community is safe and fair for everyone…
We all work hard to ensure everyone feels respected and supported while using the community, and keep that positive energy flowing. If a member or group is disrupting your experience without a genuine reason, you can report this to the community team quickly and easily by clicking the 3 dots on the post. Don’t worry about a thing, we’ll take it from there. If you get a message from the team about your behaviour, please try to work with us, as all we want to do is make this a positive place for everyone. In order to this, we have to uphold these Community Values and the Community Team has the final say.
The full Community Values can be viewed here
If you agree, please click the 'I agree' checkbox and press the 'Complete Registration' button below. If you would like to cancel the registration, click here to return to the Community homepage.
Although the administrators and moderators of E.ON Next Community will attempt to keep all objectionable messages off this site, it is impossible for us to review all messages. All messages express the views of the author, and neither the owners of E.ON Next Community, nor vBulletin Solutions Inc. (developers of vBulletin) will be held responsible for the content of any message.
By agreeing to these rules, you warrant that you will not post any messages that are obscene, vulgar,sexually-oriented, hateful, threatening, or otherwise violative of any laws.
The owners of E.ON Next Community reserve the right to remove, edit, move or close any content item for any reason.