Ofgem announced at the end of August 2023 that the energy price cap for October to December 2023 would fall to £1,923 for a typical dual fuel household paying by direct debit, down from the £2,074 set for July to September 20231. The figure for prepayment meter customers was set at £1,949 for the same quarter3. The cap limits the unit price and standing charge a supplier can charge on a standard variable tariff, so a household using more than the typical amount pays more than the headline figure2.
The reduction follows a fall in the cap to £2,074 for July to September 20231. The Energy Price Guarantee, introduced from 1 October 2022 to cap typical consumption at £2,500 a year, became less generous in July 2023 when it rose to £3,000, but the lower price cap meant the guarantee no longer set maximum prices and consumer bills fell1. The cap for October to December 2023 remains well above the £1,277 set in winter 20212.
The End Fuel Poverty Coalition said that, compared with winter 2020/21, the cost of every unit of energy used is around double what it was, with daily standing charges for gas up 8% and for electricity up 119%4. Compared with the previous winter, unit costs fell 30% for gas and 15% for electricity, but daily standing charges rose 4% for gas and 15% for electricity, and the Energy Bills Support Scheme, worth about 16% of an average bill, has been withdrawn4. Ofgem also confirmed that energy firms can increase the profit they make through the cap by around £2 a year for every average customer on a standard variable tariff4. Ofgem's separate decision on the Earnings Before Interest and Tax allowance, published on 25 August 2023, set an indicative allowance of £44 per customer for October to December 2023, compared with £34 under the previous methodology, and noted a net impact on bills from the third to the fourth quarter of an additional £25.
"The price cap does not protect those who simply cannot afford the cost of keeping warm. The UK Government can still act, by directly reducing energy bills via targeted energy discounts or a more targeted Energy Price Guarantee for low-income and vulnerable households."
National Energy Action warned that 6.3 million households could be trapped in fuel poverty over the winter, down on the previous year but far ahead of the 4.5 million in October 20214. The Fuel Bank Foundation told the Energy Security and Net Zero Select Committee on 6 September 2023 that the UK was heading for another winter fuel crisis without further government support, and that many people were still paying off debt accrued the previous year3.
Why it matters for households
The cap sets the maximum price per unit of gas and electricity, not a ceiling on the bill, so a home that uses more than the typical household pays more than £1,9232. The shift in the balance between unit costs and standing charges matters for energy independence at home: standing charges are fixed daily amounts that apply whatever the household uses, so they cannot be reduced by using less. The withdrawal of the Energy Bills Support Scheme removes a payment that was worth about 16% of an average bill4. The price cap history shows how the level has moved since 2019, and the Energy Price Guarantee scheme that ran alongside it closed at the end of March 20241. Households in Northern Ireland are covered by a separate market and a separate regulator, so this cap does not apply there1.
What happens next
The cap is updated quarterly. Ofgem was expected to announce the next cap in January 2024, and demand for electricity and gas is highest in winter2. The End Fuel Poverty Coalition said the government had abandoned plans for a social tariff consultation, despite five occasions in 2023 when leading members of the government, including the Prime Minister, promised to consult on introducing one4. It urged that a form of social tariff from April 2024, or alternative consumer protection for vulnerable customers, be considered4.
Sources5 cited
- [](https://researchbriefings.files.parliament.uk/documents/CBP-9428/CBP-9428.pdf), researchbriefings.files.parliament.uk
- Energy bills to fall – but more pain to come - EnAppSys, enappsys.com
- Fuel Bank charity boss warns MPs of impending winter fuel crisis | Fuel Bank Foundation, fuelbankfoundation.org
- Price cap sees energy costs double in three years, endfuelpoverty.org.uk
- Price Cap - Decision on amending the methodology for setting the Earnings Before Interest and Tax (EBIT) allowance, ofgem.gov.uk