Energy bills lowest for two years under new price cap

Caz Aubrey says winter was tough for her finances

Energy prices have now fallen to their lowest level for two years, but experts are urging people to stick to savings habits because bills remain expensive.

The annual bill for a household using a typical amount of gas and electricity has dropped by £238, to £1,690, under regulator Ofgem's latest price cap.

But energy saving tips, such as using songs to time four-minute showers, should be maintained, advisers say.

The fixed standing charge element of bills has risen from Monday.

New prices

Ofgem's latest quarterly price cap has now come into force. It affects 29 million households in England, Wales and Scotland. Rules are different in Northern Ireland, where prices are also falling.

The price cap sets the maximum amount suppliers can charge for each unit of gas and electricity but not the total bill - so if you use more, you will pay more.

Specifically, in England, Wales and Scotland:

• Gas prices are now capped at 6p per kilowatt hour (kWh), and electricity at 24p per kWh. That compares to a gas price of 7.42p per kWh and 28.62p per kWh for electricity over the last three months

• Households on prepayment meters will pay slightly less than those on direct debit, with a typical bill of £1,643

• Those who pay their bills every three months by cash or cheque will pay more, with a typical bill of £1,796

• Standing charges - a fixed daily charge covering the costs of connecting to a supply - have risen to 60p a day for electricity and 31p a day for gas, although they vary by region

It means energy prices are now at their lowest level since Russia's full-scale invasion of Ukraine in February 2022. However, even after the fall, bills remain well above pre-pandemic levels while some financial support from the government has expired.

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It means continued pressure on the household finances for Caz Aubrey, who kept her energy use down as much as possible during the winter months.

"I only turned the heating on when I had visitors over the winter," the 52-year-old said. "It was jumpers, blankets, one of those big snoods, or just getting up and moving around."

She also used warm hubs, but found she still had "to rob Peter to pay Paul during some months" in order to cover rent and other household bills.

"I had to work out what was more urgent, I had to prioritise. Some months I can't pay all that I should be paying, but it should all work out as long as you are open and honest with people.

"I'm not the only person who is struggling, but hopefully - fingers crossed - [bills] will start to come down now, which will make it more manageable."

Customers owe a collective £3bn to suppliers, mainly as a result of the pressure created by many months of high energy costs, despite the government's energy support and cost-of-living payments.

Tips to save money

The vast majority of people pay by direct debit, with payments smoothed out over the year. However, those who pay via prepayment meter - so pay for energy as they use it - would have benefitted more had the latest cut come over the winter.

Sarah Osborn says energy saving tips can save up to £270 a year on bills for a two-bedroom house

Either way, experts are urging people to follow Mrs Aubrey's example and maintain good energy-saving habits during the coming months.

Sarah Osborn delivers workshops across the south-east of England on energy saving, information about grants, and digital skills on behalf of not-for-profit Social Enterprise Kent.

"We estimate we can roughly save a two-bedroom household £270 a year with practical tips," said Mrs Osborn, after a meeting at the BeChange centre in the former mining community of Aylesham.

"We've had people living in real fuel poverty, who don't have mains gas and are airing small items of clothes on hot water bottles, so for them to be more empowered about energy use and potentially getting a grant is great."

How to keep energy use, and bills, down during the spring

Sarah Osborn has shared three tips to keep on top of energy use during the warmer months

• If your hot water is too hot to wash your hands in, then your setting is too high so turn the boiler down

• Manage your draughts, such as putting a black bag with scrunched up paper up an unused chimney, or limit other draughts around the home

• Limit time in the shower to four minutes. The charity WaterAid has compiled a playlist of four-minute songs to keep you to time

Read more here if you are struggling to pay energy bills

Notice of changes

Those on traditional meters are being encouraged to take a reading now, and regularly, to ensure suppliers' records are up-to-date and bills are accurate. Energy firms should have already contacted customers to inform them of the new prices now coming into force.

Forecasts by the energy consultancy Cornwall Insight suggest energy bills could fall again in the summer, before edging back up in the winter.

If correct, it would mean a household using a typical amount of energy would pay an annual bill of about £1,631 from October.

Ofgem recently launched early discussions about changing how the energy price cap is calculated. The current system was only ever designed to be temporary.

It said the market was changing as increasing numbers of consumers altered the way they consumed energy and began using electric vehicles, heat pumps and solar panels.

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Among the options is a new "dynamic" price cap which would need to be flexible for tariffs that allowed price differences if appliances switched on when there is lower demand for energy such as in the night, or when there is more supply from renewables such as when the wind blows.

It is impossible to say at this stage how prices would change compared with now for different households if this, or other, ideas are adopted.