Ofgem announced on 25 May 2023 that the energy price cap for the period 1 July to 30 September 2023 will be set at an annual level of £2,074 for a dual fuel household paying by direct debit based on typical consumption1. The regulator said the figure reflects recent falls in wholesale energy prices1. The cap level falls by £1,206 from the April to June level of £3,2801.
Because the new cap sits below the government's Energy Price Guarantee, the cap rather than the guarantee will once again set the maximum price for domestic consumers on default tariffs paying by direct debit and standard credit2. The guarantee remains in effect at £3,000 until April 2024 and will continue to protect consumers if future caps rise above that level2. Ofgem said the change means a reduction of £426 against the £2,500 typical bill customers have paid under the guarantee since October 20221.
"From 1 July, the energy price cap will be set at an annual level of £2,074 for a dual fuel household paying by direct debit based on typical consumption"
The cap is a maximum price per unit of energy, not a cap on total bills, and varies with usage, location and payment method1. Ofgem's figures for typical dual fuel consumption are:
| Payment method | April to June 2023 | July to September 2023 |
|---|---|---|
| Direct debit | £3,280 | £2,074 |
| Standard credit | £3,482 | £2,211 |
| Prepayment meter | £3,325 | £2,077 |
| Economy 7, direct debit (4,200 kWh) | £2,282 | £1,400 |
Source: Ofgem2. The prepayment cap is £3 above direct debit; standard credit is £137 above direct debit2. Ofgem said the wholesale cost allowance more than halved, from £2,170 to £1,051, a fall of £1,119 or 52 per cent2. Network costs rose marginally, from £388 to £394, and Contract for Difference costs within wholesale rose from minus £54 to £102. Ofgem also published updated Typical Domestic Consumption Values, which take effect from 1 October 20232.
Ofgem estimates around 29 million customers are on default or variable rates, including around 4 million on prepayment meters, with around 3 million still on fixed tariffs1. Which? reported the same figures and said the typical bill will still be around £1,000 more per year than pre-pandemic prices3. Turn2us said bills will settle at almost double the cost before the pandemic and that government schemes are coming to an end while the crisis is not4. Ofgem chief executive Jonathan Brearley told the Public Accounts Committee on the same day that bills were roughly £1,100 to £1,200 two years ago, so the new level is still around £800 higher5.
Why it matters for households
The cap sets the maximum unit rate and standing charge a supplier can apply on a default tariff, so a lower cap means lower rates for the roughly 29 million households on variable deals1. For a household on direct debit, the equivalent rates from 1 July are an average 30p per kWh of electricity with a 53p daily standing charge, and 8p per kWh of gas with a 29p daily standing charge; prepayment electricity averages 29p per kWh1. These are averages across regions in Great Britain, and the exact rates depend on where a home is and how it pays3. Because the cap is a unit price limit, a household using more than the typical 2,900 kWh of electricity and 12,000 kWh of gas pays more than £2,0743. The typical household figure is an illustration, not a bill. Rates differ by payment method, and the gap between prepayment and direct debit is £3 at typical use, while standard credit costs £137 more than direct debit2. The cap does not apply to fixed tariffs, and it does not apply in Northern Ireland, where a different arrangement operates. For a household's energy independence, the practical effect is that the price of each unit consumed falls, but the standing charge is paid regardless of use, so the fixed part of a bill is unaffected by how little energy a home draws. Ofgem said it is unlikely prices will return to pre-crisis levels in the medium term1.
What happens next
The next quarterly price cap update will be in August 20231. Ofgem is consulting on a revised Earnings Before Interest and Tax allowance for cap period 11a onward, indicatively expected to be around £10 higher on the typical annual bill, at around 2.4 per cent of the full cap level1. The Energy Price Guarantee remains in effect at £3,000 until April 20242. Ofgem said there is no immediate action for consumers to take as a result of the announcement1.
Sources5 cited
- Customers to pay less for energy bills from summer | Ofgem, ofgem.gov.uk
- Default Tariff Cap update, ofgem.gov.uk
- Energy price cap drops to £2,074 - Which?, which.co.uk
- Turn2Us comments on energy debt in response to new Ofgem price cap | Turn2us, turn2us.org.uk
- [](https://committees.parliament.uk/oralevidence/13238/html/), committees.parliament.uk