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How much you could save when energy bills fall from this weekend

Ofgem's latest price cap will see household energy bills fall to an average of £2,074 from £2,500 a year, writes Ruby Flanagan

Matt Davies

Matt Davies

— 3 min read
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How much you could save when energy bills fall from this weekend

A WELCOME DROP: There are a few different ways to pay for your energy, and the amount you pay is dependent on your usage (Image: Getty Images/E+)

Average household energy bills will fall by more than £400 per year when Ofgem introduces its July price cap this Saturday, dropping costs from £2,500 to £2,074 on average. However, it's important to remember that the price is not a cap on energy bills, meaning the amount you pay depends on your energy usage.

Ofgem calculates its costs for an average or medium household by basing it on a two to three-bedroom house with two to three people using 12,000-kilowatt hours (kWh) of gas and 2,900 kWh of electricity each year. The energy regulator said customers would see an annual saving of roughly £426 - but the amount you save depends on your payment method and how much you pay for your bill now, reports the Mirror.

You can pay for energy in a few ways, direct debit, receipt of bill, and a prepayment meter, with most UK residents paying by direct debit as it is a simple method. Once set up, customers will see the cash taken automatically on an agreed-upon date.

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Paying on receipt of bill is a traditional form that sees customers pay for what they've used, with suppliers sending bills for energy usage before paying it. They can be monthly or quarterly, but this is slightly more expensive than direct debit as there are no discounts.

With prepayment meters, customers pay for their energy before using it, usually by topping up the meter at a shop or online. Prepayment meters tend to be more expensive (as they were under a higher price cap). But from July, the price cap for prepayment will be the same as those for direct debit.

How much will my bills drop by?

Under the current price guarantee, the unit rate for energy sits at:

  • Gas - 10.31p per kilowatt hour (kWh);
  • Standing charge - 29.11p per day.
  • Electricity - 33.21p per kWh;
  • Standing charge - 52.97p per day.

Direct debit

Typical households will pay lower unit rates and standing charges from July, but customers should be aware that rates and standing charges are averages, meaning there are regional variations. You should check with your provider about the exact rates you can expect, with a typical household paying £2,073.98 a year from July if they pay the following rates:

  • Gas - 7.51p per kilowatt hour (kWh);
  • Standing charge - 29.11p per day.
  • Electricity - 30.11p per kilowatt hour (kWh);
  • Standing charge - 52.97p per day.

This would be a saving of £426.02 from the current government price guarantee of £2,500.

Receipt of bill

A typical household paying for energy through receipt of bill will see costs at around £2,211.63 from July 1 – based on these charges.

  • Gas - 7.91p per kilowatt hour (kWh);
  • Standing charge - 34.34p per day.
  • Electricity - 31.72p per kilowatt hour (kWh);
  • Standing charge - 59.51p per day.

This would be a saving of £288.37 from the current government price guarantee of £2,500. But you should be aware that those paying receipt of bill are paying higher than the £2,500 cap.

Prepayment meters

The average household on a prepayment meter will see their bills drop to  £2,045.90 in July –  based on the following average charges:

  • Gas - 7.11p per kilowatt hour (kWh);
  • Standing charge -37.80p per day.
  • Electricity - 29.06p per kilowatt hour (kWh);
  • Standing charge - 58.08p per day.

It would save £454.10 from the current government price guarantee of £2,500. Again, note that those paying receipt of bill are paying higher than the £2,500 cap.

To see an estimate, visit the website here.

What are your thoughts on the new price cap? Let us know in the comments below.

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