Price Drop Alert! How the New Energy Price Cap Impacts Your Bills and Options

From July, millions of households in England, Wales, and Scotland will witness a significant drop in their gas and electricity bills, thanks to a new energy price cap. This cap, set by Ofgem, determines the maximum rate customers can be charged for each unit of energy, impacting about 21 million households across the three countries.

After an increase on 1 April, where the annual bill for a typical household rose to £1,849, it is set to decrease to £1,720 in July, a £129 reduction. This price cap is reviewed every three months, with the next one taking effect from 1 July to 30 September 2025, lowering gas prices to 6.33p per kWh and electricity to 25.73p per kWh.

While the new cap brings relief, the actual cost of energy bills depends on individual usage. Factors such as the type of property, its energy efficiency, the number of occupants, and seasonal weather variations all play a role. Typically, Ofgem bases the standard for the cap on a “typical household” using 11,500 kWh of gas and 2,700 kWh of electricity annually, with direct debit payments being the norm for easier financial management.

Consumers on prepayment meters currently pay slightly less than those using direct debit, but in July, prepayment meter users will see their typical bill drop to £1,672. It’s critical for customers to submit meter readings when the cap changes to avoid being charged at incorrect estimates, a process that is simplified for those with smart meters where readings are automatically taken.

If you’re considering fixed-price deals to avoid the fluctuations of the price cap, it’s essential to weigh the benefits and potential pitfalls. While these deals provide stability, dropping energy prices could leave you paying higher rates, with potential penalties for exiting the contracts early.

Standing charges, which cover the costs for connecting to gas and electricity, are also affected by the cap; electricity charges will decrease further in July to an average of 51.37p, while gas charges will drop to 29.82p. Campaigners argue that standing charges disproportionately affect low energy users, prompting Ofgem to propose new pricing options for customers by winter 2025.

For consumers struggling with bills, extended support mechanisms like the Household Support Fund, the Warm Home Discount, and the Fuel Direct Scheme offer financial relief and affordable repayment options. Though changes to the winter fuel payment mean that over 10 million pensioners won’t receive expected funds this year, many energy providers continue to offer assistance through hardship grants and payment plans.