Ofgem Announce New Energy Price Cap

Ofgem (the Office of Gas and Electricity Markets) is the Government regulator for the UK’s electricity and natural gas markets. They regulate all aspects of the energy market, from generation at the power plants right through to supplying the end consumer (and everything in-between). They’re mainly responsible for price controls and enforcement, acting in the interests of consumers, and helping the industries to achieve environmental improvements.

What Is The Energy Price Cap?

Introduced in England, Scotland, and Wales in 2019 to prevent consumers from overpaying for their energy, the price cap limits the amount that energy suppliers can charge for each unit of energy consumed. The cap is currently reviewed every 3 months to allow energy companies to adjust their bills in response to changing wholesale costs.

Last year the Government introduced the Energy Price Guarantee, to temporarily override the Price Cap, in order to reduce energy bills for consumers. From July 1st, energy bills will be based on Ofgem’s new price cap instead of the previously used Energy Price Guarantee.

How Is The Energy Price Cap Mechanism Employed?

The price cap operates by imposing a limit on the maximum amount that a supplier can demand for their default tariff. This limit encompasses the following components:

1. The standing charge: This refers to a fixed daily fee that must be paid for energy, regardless of the actual energy consumption.
2. The unit price for electricity and gas: These prices are measured in pence per kilowatt-hour (p/kWh) and are applied to each unit of electricity and gas utilised.

To illustrate the potential impact of the price cap on an average individual, Ofgem utilises an estimation of 12,000 kWh for annual gas consumption and 2,900 kWh for annual electricity usage by a household.

However, it is important to note that this serves as a reference point to gauge the effect of the price cap on a typical household’s annual energy bill. Each household will have varying energy consumption patterns, leading to individualised differences.

Moreover, numerous factors influence the specific charges levied by suppliers within the price cap framework. These factors encompass the payment method chosen for energy bills and the type of energy meter installed in the residence.

What Will Energy Prices Be For The Next Three Months?

Starting from July 1, 2023, energy prices will be determined once again by Ofgem’s price cap.

Ofgem has recently announced that between July 1st and September 30th 2023, the maximum unit cost for electricity will be 0.30p/kWh, while for gas it will be 0.08p/kWh.

These rates are lower than the current Energy Price Guarantee, which means that households can anticipate a reduction in their energy bills. Under the current guarantee, the average household pays approximately £2,500 per year for energy.

Under Ofgem’s price cap, the maximum amount a household can be charged is £2,074, but the overall yearly expense per customer may vary based on factors such as the number of individuals you reside with, the size of your residence, and your energy consumption.

What Can I Do To Keep My Energy Bills Down?

Despite the announcement of the new energy price cap, there are several other ways in which individuals can reduce their energy bills:

1. Improve insulation: Enhance the insulation of your home by sealing any air leaks, insulating walls, floors, and attics, and ensuring proper weatherstripping around doors and windows. This prevents heat loss during winters and reduces the need for excessive cooling during summers.
2. Upgrade to energy-efficient appliances: Replace old, inefficient boilers with energy-efficient heat pumps. Couple these with solar panels to generate significant savings and increase your properties’ energy efficiency.
3. Use energy-efficient lighting: Switch to LED or CFL light bulbs, which use significantly less energy than traditional incandescent bulbs. Additionally, remember to turn off lights (and other electrical appliances) when not in use.
4. Optimise heating and cooling: Regularly maintain your heating and cooling systems to ensure they operate efficiently. Clean or replace filters as needed, schedule professional inspections, and consider upgrading to a more energy-efficient heating/cooling system if necessary.
5. Conserve water and hot water usage: Install water-saving toilets and smart taps to reduce water consumption. Use cold water for laundry when possible, and consider installing greywater or rainwater harvesting systems to further reduce water wastage.
6. Conduct an energy audit: Consider conducting an energy audit to identify energy inefficiencies in your home. This assessment can help you pinpoint areas that require improvement and prioritise energy-saving upgrades.

How We Can Help

We specialise in energy efficient, renewable-based technologies, and we’ve helped hundreds of commercial and residential clients improve their energy efficieny and reduce their energy bills.

We understand that choosing and transitioning to any renewables-based system can be a complex and challenging process which is why we offer a complete “turn-key” range of services that include consultation & advice, energy assessment, system design, installation, maintenance, and after-sales support.

Choosing the best method to increase your energy efficiency isn’t easy, so if you’re in need of any assistance then don’t hesitate to get in touch today. You can Contact Us on our website or via:

01400 250572 or info@radiantgroupuk.com

While you’re here, check out all of our Heat, Power, and Water-Saving renewable solutions to see how we can help you!