Energy price cap: What is it and what will happen to bills in January?
The energy regulator, Ofgem, has said household energy prices will go up in January under its new price cap.
The price cap limits how much suppliers can charge households for each unit of gas and electricity they use. Ofgem sets the cap every three months and this one will cover January to March 2024.
What is the energy price cap?
In recent years, the cost of variable tariff energy deals in England, Wales and Scotland has been controlled by the energy price cap, which is now set every three months by Ofgem, the energy regulator.
The cap confirms the maximum price suppliers can charge households per unit of energy on a standard - or default - tariff in normal circumstances. It covers 29 million households.
Energy prices soared after Russia's invasion of Ukraine in February 2022, so in October ministers said household bills would be limited by a temporary government guarantee instead.
Under this, a typical household's annual gas and electricity bill stayed below £2,500 despite Ofgem's cap increasing above this level.
The Energy Price Guarantee finished in June 2023, and the Ofgem cap once again determined how much customers can be charged.
From January, Ofgem says the typical annual household bill will go up to £1,928 from £1,834, a rise of £94 or 5%.
Energy is regulated separately in Northern Ireland, where bills are slightly lower.
What is a typical household?
The calculations for a typical household are based on a direct debit customer using 11,500 kWh (kilowatt hours) of gas and 2,700 kWh of electricity a year.
A kilowatt hour is a unit of energy used to calculate your bill.
However, most households aren't typical.
Bills are based on how much energy you actually use, which depends on the number of people, the type of property and its energy efficiency.
What if I'm on on a prepayment meter?
In July 2023, Ofgem said around four million households had prepayment meters. Many have been in place for years, but some billpayers have been switched to prepayment meters if they struggled to pay.
It reviewed their use after an investigation by The Times found debt agents acting for British Gas wrongly broke into vulnerable people's homes to forcibly fit meters.
Under new rules, suppliers must give customers more opportunity to clear their debts, contacting them at least 10 times before installing a meter, and they cannot be installed at all in certain households.
The government has promised to bring prepayment energy charges in line with those for direct debit customers.
Between October and December, the typical bill for prepayment households will be £1,949 (under the old usage calculations), down from £2,077, but still £26 more than for direct debit customers.
Typical bills for those who pay via cash, cheque or bank transfer, usually every three months, will be £129 more.
Households using prepayment meters will see their typical annual energy bill rise to £1,960 in January.
Those who pay every three months by cash and cheque pay more than those who use other methods of payment. Their typical annual bill in January will be £2,058, some £130 more a year than if they paid by direct debit.
What extra support is available for energy bills?
Some groups across the UK who may struggle to pay bills are receiving additional help through cost-of-living payments:
£900 to households on means-tested benefits - paid in three instalments in spring and autumn 2023 and spring 2024
£300 for pensioner households
£150 to people on certain disability benefits
Vulnerable families can also claim help through the Household Support Fund, and - from October 2023 - the Warm Home Discount scheme.
Importantly, the £400 discount which all households in England, Wales and Scotland received last winter has finished.
What help are businesses getting?
Until the end of March 2023, businesses had their costs limited under the government's Energy Bill Relief Scheme.
Under a new scheme running until March 2024, firms get a discount on wholesale prices, rather than costs being capped.
Heavy energy-using sectors, like glass, ceramics and steelmakers, will get a larger discount than others.
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