From 1 July 2023 the level of the price cap fell below the level of the Energy Price Guarantee (EPG) set by government, Ofgem said, meaning the cap rather than the EPG sets the maximum price for domestic consumers paying by direct debit and standard credit on default tariffs1. The EPG remains in effect at a level of £3,000 until April 2024 and will continue to offer protection if future price caps rise above that level1.
The dual fuel, direct debit cap for the period 1 July to 30 September 2023 fell to £2,074, a reduction of 37% since the previous update and £426 or 17% below the EPG level of £2,500 for April to June 20231. Ofgem said the wholesale cost allowance more than halved, from £2,170 to £1,051, a decrease of £1,119 or 52%1. The cap sets maximum prices, not maximum bills, and what an individual household pays varies with how much energy it uses, where it lives and how it pays1.
Rates by payment method for 1 July to 30 September 2023, as published by Ofgem1:
| Payment method | Cap level | Difference vs direct debit |
|---|---|---|
| Direct debit | £2,074 | n/a |
| Standard credit | £2,211 | £137 more |
| Prepayment | £2,077 | £3 more |
| Economy 7 (direct debit, 4,200 kWh) | £1,400 | n/a |
Ofgem said the EPG would provide further help to prepayment customers from 1 July 2023 to mitigate the higher prices they pay compared with a typical direct debit customer, with discount rates to be published by the Department for Energy Security and Net Zero1. The charity National Energy Action said the Energy Bills Support Scheme, which paid £66 or £67 a month over six months, a total of £400, also ended on 1 July, and that customers would restart paying for government programmes through their energy bills via higher standing charges2. NEA put the typical annual bill at £2,100 from 1 July, against £1,271 in October 2021, and said 6.6 million UK households would be in fuel poverty2.
"Despite falls in retail prices from July, many of the people we help are still struggling. As of tomorrow, two thirds of households across the UK will no longer benefit from any assistance to offset the impacts of the energy crisis and Ofgem's price cap will offer limited protection to these households."
Why it matters for households
The change of mechanism matters because the two schemes work differently. The EPG reduced the unit cost of electricity and gas so that a typical dual fuel direct debit bill reached a target level1. The price cap sets a maximum unit rate and standing charge, so a household that uses more than the typical amount pays more than the headline figure1. For a home's energy independence, the practical effect is that the ceiling on what a supplier can charge for each unit is now set by the regulator's formula rather than by a government subsidy, and the level of that ceiling moves with wholesale costs each quarter. Ofgem's own figures show the wholesale allowance falling sharply, while network costs rose marginally from £388 to £3941. The gap between standard credit and direct debit was £137 for the quarter, and prepayment customers paid £3 more than direct debit1. The EPG's prepayment support was intended to address that differential until 31 March 20243.
What happens next
Ofgem said it had published the latest 2023 Typical Domestic Consumption Values, to come into effect from 1 October 2023, and would use them in its August price cap announcement with the 2019 values included for comparability1. The EPG remains in effect at £3,000 until April 20241. Ofgem said the outlook for the January to March 2024 cap period did not currently suggest a further material reduction in costs, though this remained uncertain3.