BILL BOOST
Major change to energy bills from July and experts predict it will save millions cash
Plus, we've explained whether now is the right time to consider a fixed deal
MILLIONS of households will soon breathe a new sigh of relief as energy bills are predicted to fall again in July.
The average household energy bill is set to fall by another 7% in July when the latest change to the price cap takes effect, according to experts.
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Energy consultants Cornwall Insight said they expect the typical household's energy bill to fall from £1,690 a year to £1,574 a year on July 1.
This would be £500 less than the cap in July last year, when it was £2,074 and just £34 higher than April 2024's cap.
The latest forecast is slightly higher than the £1,560 the group previously predicted for July.
However, the price cap changes every three months, so your bills could change again in October.
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Cornwall Insight added that it expects Ofgem to increase the energy price cap in October before dropping it again in January 2025.
Ofgem will announce the energy price cap for July to September on May 24.
Craig Lowrey, principal consultant at Cornwall Insight, said: "Our projections suggest that from July, the average annual bill will fall by around £500 compared to last summer, offering further relief given the quarter-on-quarter drop seen in April.
"Of course, we must recognise lower prices don't erase all the problems.
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"The very fact we are still seeing bill levels which are hundreds of pounds above pre-crisis levels underscores the ongoing challenges faced by households."
Ofgem changes the price cap every three months based on several factors, the most important of which is the price of energy on wholesale markets.
The price cap does not limit a household's total bills, people still pay for each unit of gas and electricity they use – the figures provided are just for an average-use household.
WHEN DOES THE PRICE CAP CHANGE?
OFGEM reviews the cap on unit rates for those on the default tariff every three months.
This means the energy price cap can move up or down at four different points in the year.
Price cap rates are updated on the following dates:
- January 1
- April 1
- July 1
- October 1
The level for the next energy price cap in July 1, 2024 will be confirmed on May 24.
Ofgem is currently reviewing the price cap and looking at how it is calculated.
This includes mulling over changes to standing charges, which are fixed daily charges that cover the cost of supply connections.
The regulator is also consulting on proposals to abolish the ban on acquisition-only energy tariffs, or BAT for short.
It was introduced in April 2022 to remove the often risky short-term discounted tariffs intended to attract customers to switch suppliers.
It means that energy firms were prevented from offering cheap prices to newbies unless they also offered the same deals to existing customers.
That ban could now be lifted as soon as October meaning cheaper gas and electricity deals could hit the market in months.
TIME TO ACT?
With prices looking to fall, you might be wondering if now is the time to act and move over to a fixed energy deal.
Energy firms have started introducing price cap-beating fixed energy deals in recent months, though nowhere near the levels seen before the energy crisis.
Fixed deals protect customers from bill hikes if Ofgem were to increase the price cap in the future.
However, you may risk paying more if Ofgem's energy price cap continues to fall in the coming months.
Several major suppliers, including British Gas, Octopus and Ovo Energy, are now offering cheap fixed deals.
At the moment, those on the standard variable tariff (SVT) have their rates capped by Ofgem at the following levels:
- 6.04p per kilowatt hour (p/kWh) for gas
- 24.50p/kWh for electricity
- A standing charge of 31.43p per day for gas
- A standing charge of 60.10p per day for electricity
For a typical household that uses an average of 11,500kWh of gas and 2,700kWh of electricity every year, these rates will cap bills at roughly £1,690.
But with Cornwall Insight's forecast expecting bills to drop even lower to £1,574 in July, you should now take this figure into account.
If you're offered a fix lower than this predicted price cap, it could be worth considering.
Richard Neudegg, director of regulation at Uswitch.com, says: "A predicted 7% drop in energy prices in July is clearly good news, with the price cap looking likely to hit its lowest level in over two years.
"The future still remains uncertain, and with the price cap changing every three months – currently expected to rise in October before falling slightly in January – it's crucial not to be complacent.
"Households who want to lock in rates for price certainty should run a comparison to see what energy tariffs are available to them.
"There are many 12-month fixed tariffs available at rates cheaper than the current price cap, and even some that are 2% below these new predicted July rates."
ARE THERE ANY FIXED DEALS WORTH CONSIDERING?
COMMENT by James Flanders, The Sun's Chief Consumer Reporter:
Energy bills look set to take another tumble into the summer, with Ofgem set to drop its cap by £116 a year on July 1.
The move will benefit around 29million households on the standard variable tariff.
This is great news, but it's still a far cry away from where typical bills sat before the energy crisis kicked off.
As Sun Money's energy guru, I'm always asked by friends, family, and readers whether it's time to consider switching to a fixed-energy deal.
Indeed, there are plenty of fixed deals out there right now which offer rates lower than those charged under Ofgem's current price cap.
But actually, there's only one that'll work out cheaper than July's forecasted cap.
Ecotricity's Green 1 Year Fixed tariff, costs a typical household £1,540 a year - £150 cheaper than the current cap, but you'd only be £34 better off under July's price cap.
It also comes with a £75 exit fee per fuel - so that'll set you back £150 if you decide to switch before the 12 months is up.
If the only think you're after is complete price stability over a long period then go ahead take the deal.
But would I fix my own bills? If I'm being totally honest, I'd say no.
My head will only begin to turn once deals that are at least £200 or so cheaper than the price cap start hitting the market.
This is because the current price cap rates haven't increased or decreased by this level in the last 12 months.
But this is unlikely to happen anytime soon as the energy market remains extremely volatile.
And it will continue to do so as disruptions to the North Sea oil pipeline and wars in Ukraine and Gaza continue.
For now, the best prices seem to be rewarded to customers who opt for flexible or tracker energy tariffs.
FLEXIBLE TARIFFS?
Customers unwilling to commit to long-term fixed energy deals may want to consider flexible tariffs.
Kara Gammell, personal finance expert at comparison site Money Supermarket Group, says: "These will almost always be at or below the price cap."
For example, E.ON Next's Pledge variable tariff offers a fixed discount of around three per cent on the price cap rates for 12 months.
It will save the average household around £50 a year but comes with a £50 exit fee if you switch before the year ends.
The deal is available to both new and existing customers.
For a bigger reward but at a higher risk, Octopus Energy offers two variable tariffs which track wholesale gas and electricity costs.
Customers on the Octopus Tracker see their prices change daily, but unit rates have remained consistently lower than the price cap in recent months.
For example, in the last 30 days, people living in Southern England on the Octopus Tracker paid a maximum of 20.3p per kWh for electricity and 4.81p per kWh of gas, which is 4.2p and 1.23p cheaper than the price cap per fuel.
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The Agile Octopus tariff works similarly to the Octopus Tracker, the main difference is the former’s prices change every half hour.
Remember that those wishing to switch to any of these tracker tariffs must have a smart meter.
What energy bill help is available?
THERE'S a number of different ways to get help paying your energy bills if you're struggling to get by.
If you fall into debt, you can always approach your supplier to see if they can put you on a repayment plan before putting you on a prepayment meter.
This involves paying off what you owe in instalments over a set period.
If your supplier offers you a repayment plan you don't think you can afford, speak to them again to see if you can negotiate a better deal.
Several energy firms have grant schemes available to customers struggling to cover their bills.
But eligibility criteria varies depending on the supplier and the amount you can get depends on your financial circumstances.
For example, British Gas or Scottish Gas customers struggling to pay their energy bills can get grants worth up to £1,500.
British Gas also offers help via its British Gas Energy Trust and Individuals Family Fund.
You don't need to be a British Gas customer to apply for the second fund.
EDF, E.ON, Octopus Energy and Scottish Power all offer grants to struggling customers too.
Thousands of vulnerable households are missing out on extra help and protections by not signing up to the Priority Services Register (PSR).
The service helps support vulnerable households, such as those who are elderly or ill, and some of the perks include being given advance warning of blackouts, free gas safety checks and extra support if you're struggling.
Get in touch with your energy firm to see if you can apply.
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