What the Vitality Value Cap change means for vitality payments
7 min read
The Vitality Value Cap is the utmost quantity vitality suppliers can cost you for every unit of vitality you utilize. It’s up to date each three months by vitality regulator Ofgem, to guarantee that costs mirror adjustments in underlying vitality prices in addition to inflation.
The cap was lowered from July to September, limiting the typical invoice for a typical family utilizing gasoline and electrical energy (and paying by direct debit) to £2,074 yr, or about £173 a month. Wholesale vitality costs have now fallen additional, so Ofgem has introduced one other drop from October to December, lowering the cap by round 7% to £1,923 a yr, or about £160 a month.
However that is the typical a ‘typical’ family can pay. Ofgem estimates a typical or ‘medium-use family’ as these residing in a 2-3 bed room home with 2 or 3 folks. The quantity you pay will depend upon how a lot vitality you utilize, and the place you reside, in addition to the way you pay your vitality payments.
The cap stays quite a bit greater than the typical family invoice was earlier than the vitality disaster started in 2021 and Ofgem says the market stays ‘unstable’.
So will the discount to the value cap make an enormous distinction to your family payments, and can costs hold taking place? We take a better look.
What’s the Vitality Value Cap — and the way is it totally different to the Vitality Value Assure?
In 2019, the federal government launched the Vitality Value Cap in response to rising wholesale vitality prices. It units a most value that vitality suppliers can cost.
However since October 2022, the annual vitality invoice for a typical family utilizing gasoline and electrical energy (paying by direct debit) has been restricted to £2,500 by the Vitality Value Assure (EPG). This extra non permanent measure was first put in place by the federal government as a result of the Vitality Value Cap was so excessive. From January to March this yr, the cap peaked at £4,279, however the EPG protected households from the rise.
The Vitality Value Assure went again as much as £3,000 from July, but it surely’s not at present wanted as a result of since July the Vitality Value Cap has been decrease. See under.
| Apr-Jun | Jul-Sep | Oct-Dec | |
|---|---|---|---|
| Vitality Value Cap | £3,280 | £2,074 | £1,923 |
| Typical family vitality invoice below the Vitality Value Assure | £2,500 | £3,000 (However a ‘typical’ family pays £2,074 because the Vitality Value Cap is decrease) | £3,000 (However a ‘typical’ family pays £1,923 because the Vitality Value Cap is decrease) |
* Figures are for typical home consumption paying by direct debit and can differ based mostly on precise family utilization.
READ MORE: What’s the distinction between the Vitality Value Cap and the Vitality Value Assure?
Is there nonetheless a reduction on vitality payments?
From October 2022 till March this yr, all households got a reduction of £400 off vitality payments as a part of the federal government’s Vitality Payments Assist Scheme. This labored out as a credit score of £66 to electrical energy payments in October and November, and £67 in December, January, February and March.
This scheme has now ended, so if you’re figuring out how a lot your payments will likely be in comparison with final yr, it’s good to remember that these month-to-month reductions received’t be utilized this winter except the federal government broadcasts an analogous scheme.
Does the Vitality Value Cap have an effect on me?
In case you’re on a set tariff on your vitality provide, then you definitely received’t be affected by the value cap.
The Vitality Value Cap is utilized for those who’re on a default vitality, or normal variable, tariff. This contains those that pay by direct debit, normal credit score, prepayment meter, or who’ve an Economic system 7 (E7) meter.
If in case you have a pre-payment meter, the Vitality Value Assure (EPG) now ensures that prices are extra aligned with direct debit customers. From 1 October 2023, there will likely be a change in how the low cost is paid. As an alternative of being delivered as a reduction to unit charges, there will likely be a reduction utilized to the standing cost.
In case you pay by direct debit, your vitality payments are normally based mostly on an estimate of how a lot you utilize. So for those who’re in credit score, it’s price doing a meter studying and getting in contact along with your provider to test you’re nonetheless paying the correct quantity.
Vitality Value Cap by cost kind: October to December 2023
| Direct Debit | Prepayment | Commonplace Credit score | Economic system 7* | |
|---|---|---|---|---|
| July – Sept 2023 cap | £2,074 | £2,077 | £2,211 | £1,400 |
| Oct – Dec 2023 cap | £1,923 | £1,949 | £2,052 | £1,298 |
Supply: Ofgem. *Electrical energy-only Direct Debit
READ MORE: Learn how the Vitality Value Cap is about
How will the value cap change influence my vitality payments?
The Vitality Value Cap is about at £1,923 a yr, or about £160 a month, from October to December. However that is simply an estimate for a typical, or ‘medium-use family’. And it’s not a cap in your complete invoice, however as a substitute limits what suppliers can cost you per unit of vitality used.
You’ll be able to test the typical fee charged per unit of vitality used under, and evaluate that along with your family vitality payments to work out an estimate of your family’s vitality utilization.
Vitality Value Cap: What’s the typical fee charged per unit of vitality used?
| Apr-Jun 2023 | Jul-Sep 2023 | Oct-Dec 2023 | |
|---|---|---|---|
| Gasoline | 10p per kWh | 8p per kWh | 7p per kWh |
| Electrical energy | 33p per KWh | 30p per kWh | 27p per kWh |
Supply: Ofgem. Primarily based on common charges for direct debit customers, which differ by area
Ofgem estimates a typical or ‘medium-use family’ as a two- to three-bedroom home with 2 or 3 folks residing in it.
In case you stay in a flat, or a one-bedroom home, your vitality use is estimated to be ‘low’. And for those who stay in a four-bedroom house, with 4-5 folks, your vitality use is estimated to be ‘excessive’. See under.
| Vitality use | Instance – measurement of house & variety of residents | Typical annual gasoline use | Typical annual electrical energy use |
|---|---|---|---|
| Low | Flat or 1-bed home; 1-2 folks | 8,000 kWh | 1,800 kWh |
| Medium | 2-3 mattress home; 2-3 folks | 12,000 kWh | 2,900 kWh |
| Excessive | 4+ mattress house, 4-5 folks | 17,000 kWh | 4,300 kWh |
| Supply: Ofgem |
Supply: Ofgem
Yow will discover out what the totally different charges and standing fees will likely be from 1st October 2023 in your area here.
How a lot you’ll pay additionally relies on how energy-efficient your private home is, and which home equipment you utilize – and the way typically you utilize them.
Vitality utilization is calculated in kilowatt (kWh) hours, or items. One kWh is sufficient to energy a 100-watt lightbulb for 10 hours, however as compared, it takes 4.5 kWhs to energy a single cycle of a tumble dryer.
Will there be a change to the standing cost on my invoice?
The mounted standing cost you pay is simply to have a connection, no matter how a lot vitality you utilize. The quantity you’ll pay relies on your provider, what tariff you’re on, and the place you reside. The typical every day standing cost for electrical energy is 53p a day, and 30p a day for gasoline. That works out at simply over £300 a yr on common.
Yow will discover out what the totally different charges and standing fees will likely be from 1st October 2023 in your area here.
Will vitality prices proceed to fall?
The Vitality Value Cap covers a interval of three months and adjustments 4 instances a yr: in January, April, July and October.
Analysts at Cornwall Insight, an unbiased vitality analysis, analytics and consulting agency, forecast vitality prices to rise once more from January 2024.
Their forecast reveals a rise to the value cap of 6% to £2,033 from January to March, earlier than dropping again to £1,964 (-3%) from April to June 2024, and £1,917 (-2%) from July to September 2024.
What different authorities assist is there for vitality payments?
There are a number of the government-funded schemes in England, Scotland and Wales to assist with vitality payments. In case you stay in Northern Eire, you could find extra info here.
One of many schemes that provides assist in the course of the winter months is the Warm Home Discount Scheme. Underneath earlier schemes, for those who get advantages, or for those who or your companion get the Assure Credit score factor of Pension Credit score, you could possibly get a reduction of £150 off electrical energy invoice in winter, or £150 added to your prepayment meter. Or you could possibly additionally get a reduction in your gasoline invoice as a substitute in case your provider gives each gasoline and electrical energy. The scheme reopens in October 2023 and extra particulars will likely be supplied within the coming months.
READ MORE: What’s the distinction between the Vitality Value Cap and the Vitality Value Assure?
