Starting Tuesday, 21 million households in England, Scotland, and Wales will see a decrease in their energy prices. However, there is uncertainty about whether these prices will remain low during the colder and darker winter months.
The average household using a typical amount of gas and electricity will see a reduction of £11 per month due to the latest price cap set by regulator Ofgem.
While this 7% decrease has been welcomed by billpayers, there are concerns that prices will still be high during the winter. To mitigate this, people are advised to compare different fixed deals that offer more stability in payments.
The future of energy prices is difficult to predict. Although prices were not expected to change significantly this autumn, events in the Middle East could still impact wholesale prices and in turn, household bills. Cornwall Insight, an energy consultancy, has forecasted a further 1% drop in October, bringing the annual bill for a typical household to £1,697. However, there is uncertainty surrounding this prediction.
Cornwall Insight stated that even with the price cap, energy prices are still much higher than they were before the pandemic and are not expected to decrease significantly in the coming years. Ofgem is encouraging people to consider fixed deals, which could result in an annual saving of £200.
Those already on fixed deals will not see any change in their monthly payments following the price cap adjustment on Tuesday. Currently, 35% of billpayers are on fixed tariffs, which is an increase from 15% a year ago when there were fewer options available.
It is important to note that fixed deals only set the unit rate and the actual household bills depend on the amount of energy used. During this time of year, when heating is usually not in use, families tend to focus on the cost of cooking, especially as food prices have risen sharply.
Nadina Hill, a mother-of-two who works part-time at an emergency services control room, has been trying to manage her cooking and energy costs. She participated in an eight-week course with her daughter Gracie, 14, to learn how to cook healthy meals for less. The Community Kitchen, run by Stevenage Football Club Foundation, has helped hundreds of families by focusing on menus with portions costing £1 or less. Hannah Marsh, head of health and wellbeing at the foundation, shared some tips for saving money on food, such as using recipes like pizza in a pan, bulk cooking meals, and considering using cheaper tinned or frozen vegetables.
Gracie also mentioned that her pets, a rabbit and two guinea pigs, benefited from the course by receiving treats made from vegetable peelings instead of being thrown away.
Every three months, Ofgem sets a maximum price that suppliers can charge for each unit of energy for those on a variable tariff in England, Scotland, and Wales. This does not apply to Northern Ireland, which has its own energy market. Customers on variable deals can estimate their energy bill decrease by subtracting 7% from their previous monthly direct debit. According to Ofgem, the annual bill for a typical household using a typical amount of energy and paying by direct debit has decreased by £129 to £1,720.
Although prices are still significantly higher than before the pandemic, people have adapted their lifestyles and finances to manage these costs. Jenny David, a nurse, and her husband Mark, who works in a kitchen and bathroom fitting business, have found ways to save money, such as investing in an air fryer and planning their shopping trips carefully. Jenny also attends a free weekly outdoor fitness class instead of paying for a gym membership to save money.
Another strategy for managing energy costs is to provide regular meter readings to suppliers to ensure accurate billing. The latest changes in the price cap for customers who pay by direct debit are as follows:
Gas prices are capped at an average of 6.33p per kilowatt hour (kWh), down from 6.99p.
Electricity is capped at 25.73p per kWh, down from 27.03p.
Standing charges vary by region but have decreased on average to 51.37p per day for electricity, from 53.8p, and to 29.82p per day for gas, from 32.67p.
In addition:
A typical household uses 2,700 kWh of electricity and 11,500 kWh of gas per year.
Households on pre-payment meters pay slightly less than those on direct debit, with a typical annual bill of £1,672.
Those who pay their bills by cash or cheque pay more, with a typical annual bill of £1,855.
Ofgem is considering changes to the system of standing charges, which has sparked debate over how they operate. The government’s decision to limit eligibility for the winter fuel payment last year raised concerns about the cost of energy for pensioners. However, after facing opposition, the prime minister and chancellor reversed the decision. This means that 75% of pensioners in England and Wales will receive the payment in winter 2025, and the rules will be similar in Scotland. From this winter, the payment of £200 or £300 per pensioner household will go to those with an annual income of £35,000 or less. The Warm Home Discount, worth £150, will also be extended this winter and automatically applied to the bills of those on means-tested benefits.
Additional reporting by Abi Smitton