Ofgem's chief executive, Jonathan Brearley, told the Public Accounts Committee on 25 May 2023 that the new energy price cap would be £2,074 for an average annual bill1. Because that figure sits below the £2,500 level at which the government's Energy Price Guarantee fixes bills, the guarantee will not apply1.
Brearley set out the movement in numbers. The cost to an average household for its energy use was about £3,300, with the price guarantee paying part of the bill so that bills were fixed at £2,5001. He said the fall in wholesale gas and electricity prices had brought prices down to £2,074, a drop of roughly £1,200 per year, and that this fed through both as no longer meeting the threshold for government support and as a direct reduction in bills of around £4201.
"since the new price cap is going to be £2,074, that policy will not apply"
The committee heard that the guarantee remains in place as a backstop. Brearley said it "remains as a backstop if prices spike upwards again, until the end of March 2024"1. He also said the Energy Bills Discount Scheme is now in place this year1.
Brearley emphasised that bills remain high by recent standards. He said bills are still at £2,000 a year, substantially higher than in 2021, when they were roughly between £1,100 and £1,200, leaving them about £800 higher1. He said many households will struggle to pay that1. On the direction of travel, he said it is very hard to predict, that every projection he has seen of how the gas market might evolve has turned out to be substantially wrong, and that a best guess of stable prices is "literally a guess"1. He noted that last autumn prices were 15 times what they used to be1.
| Measure | Figure |
|---|---|
| Cost to an average household for its energy use | about £3,3001 |
| Level at which bills were fixed under the price guarantee | £2,5001 |
| New price cap for an average annual bill | £2,0741 |
| Direct reduction in bills | around £4201 |
| Bills two years previously | roughly £1,100 to £1,2001 |
Why it matters for households
The cap is the default limit on what a supplier can charge a household on a standard variable tariff for each unit of gas and electricity, and the £2,074 figure is expressed as an average annual bill rather than a cap on the total a household pays. The practical effect of the cap falling below £2,500 is that the Energy Price Guarantee, which had been paying part of household bills, no longer applies, and the reduction households see comes through the cap itself1. The guarantee stays as a backstop until the end of March 2024 if prices spike again1. For a home's energy independence, the level of the cap determines what a household pays for the units it uses, so the fall reduces the cost of every unit consumed but does not change how much energy a home needs. Bills remain about £800 above their level two years earlier1, and the committee heard that many households will struggle to pay1. The cap applies automatically to default tariffs, and the price cap guide sets out how it works, while the typical household figure explains what the average annual number does and does not mean. The price cap history records every level and when the next is announced, and the Energy Price Guarantee page covers the scheme that no longer applies at this cap level.
What happens next
The Energy Price Guarantee remains as a backstop until the end of March 2024 if prices spike upwards again1. Brearley said Ofgem is working across the sector and with government to consider what might need to be done in response to bills remaining high, including companies providing more access to support for vulnerable customers and putting customers who struggle on affordable repayment plans, with decisions for Ministers1. No further date for the next cap announcement is given in the evidence.
Sources1 cited
- [](https://committees.parliament.uk/oralevidence/13238/html/), committees.parliament.uk