Ofgem published the updated Default Tariff Cap levels for charge restriction period 9b, covering the three months from 1 January 2023 to 31 March 2023, on 24 November 20221. The dual fuel direct debit cap rose 21 per cent since the last update, to £4,2791.
The regulator said the increase was driven mainly by wholesale costs, which rose by £669 since the previous cap update. Indexed components also rose, including VAT at £204, operating costs at £214, EBIT at £76, headroom at £53 and payment method uplift at £25. Contract for Difference costs fell by £17. All other cap components stayed the same as for October 20221.
"Today we have published the updated cap levels for charge restriction period (“cap period”) 9b, covering the three months from 1 January 2023 to 31 March 2023"
The cap level differs by payment method and meter type1:
| Cap level | Period 9a (Oct 22 to Dec 22) | Period 9b (Jan 23 to Mar 23) |
|---|---|---|
| Direct Debit | £3,549 | £4,279 |
| Standard Credit | £3,764 | £4,533 |
| Prepayment | £3,608 | £4,358 |
| Economy 7 (DD) | £2,230 | £2,972 |
Standard credit customers pay an additional £254 compared with direct debit, and prepayment customers an additional £80. For electricity only customers on Economy 7 meters, the direct debit cap level rose to £2,988, an increase of £759, while the prepayment level rose to £2,972, £17 less than direct debit1.
The cap level also varies by region. The dual fuel direct debit cap ranges from £4,213 in Northern to £4,359 in North Wales and Mersey, against a GB average of £4,2791.
Ofgem stated that the figures in its letter represent the Default Tariff Cap level and not what domestic consumers will pay under the Energy Price Guarantee, which came into effect on 1 October 2022 and reduces the unit cost of electricity and gas so that a typical dual fuel direct debit bill is £2,500 until 31 March 20231. The regulator said the guarantee sets maximum prices, not maximum bills, and that the amount an individual customer pays varies with how much energy they use, where they live and how they pay1.
Ofgem also said it decided in August 2022 that the Default Tariff Cap will be updated quarterly rather than every six months1. It said that in updating the cap it was not making a policy decision or exercising a judgment, and that it expects suppliers to comply with their obligations under Standard Licence Conditions and the Energy Price Guarantee scheme1.
Why it matters for households
The cap level is the maximum a supplier can charge for unit rates and standing charges, not a limit on the total bill, so a household using more than the typical consumption figures will pay more than the headline number1. The figures are calculated using Typical Domestic Consumption Values of 2,900kWh for electricity, 12,000kWh for gas and 4,200kWh for multi-register meters such as Economy 71.
For a household's energy independence, the gap between the cap level and the Energy Price Guarantee is the amount the government is covering for a typical dual fuel direct debit customer over the quarter. The guarantee holds that typical bill at £2,500 until 31 March 2023, while the cap level for the same period is £4,2791. The difference is not paid by the household at the point of billing under the scheme as described, but the cap level is the figure that would apply without it.
Payment method and region both change the cap level, so two homes with the same consumption can face different maximum rates. The regional tables show the dual fuel direct debit cap varying by £146 between the lowest and highest regions1.
What happens next
The cap period 9b levels run from 1 January 2023 to 31 March 20231. The Energy Price Guarantee, as described by Ofgem, is set to hold a typical dual fuel direct debit bill at £2,500 until 31 March 20231. Ofgem has not reported in this letter what applies after that date. The regulator said it will continue to monitor supplier compliance and take enforcement action where licence requirements or contract terms are not met1.
Sources1 cited
- Default Tariff Cap update, ofgem.gov.uk