The energy regulator, Ofgem, will announce its energy price cap for April to June next week, 27 February.
Although your household bills are currently determined by the government's Energy Price Guarantee (EPG), Ofgem continues to set a quarterly price cap.
But since the price cap was rising to extortionate levels, the government stepped in the the EPG, which capped unit prices for energy and superseded the energy price cap set by Ofgem.
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As it stands, the government’s EPG is far lower than what households would be paying than if they were still subject to prices under Ofgem’s price cap.
Currently, under the EPG, announced in the mini-Budget, a typical household bill is around £2,500 per year - this is in place until April 2023.
Under the energy price cap, between October to December 2022, the average typical household bill would have been £3,764 (based on standard dual tariff with standard credit) - 50.6% higher than the EPG rate. Between January and April 2023, the typical average would have been £4,279 (based on standard dual tariff with standard credit) - 71.2% higher than the EPG rate.
From April 2023, the EPG will however go up, taking the average typical household bill to £3,000 a year. But, with gas prices sliding, there is a chance the next energy price cap could be lower than the EPG.
We look at what this means for your energy bills in 2023.
What could the price cap be for April?
Predictions from analysts at Cornwall Insight suggest the cap rate for April to June 2023 would place the typical average household bill to £3,294 - almost 10% more than the EPG.
So, in April, if Cornwall Insight’s prediction is correct, then the average typical household will pay £294 less under the EPG rate.
If this prediction turns out to be correct, then you are likely to stay on the EPG rate.
What could the price cap be from July 2023?
Analysts at Cornwall Insight predicted that energy prices will fall below the EPG from July 2023 and the energy cap set by Ofgem could be lower than the EPG from this summer. It predicts that from July to September, the price cap could be £2,361 - 28% less than the EPG rate from April. This means households could be better-off £639 (based on a typical household with average use) under the energy price cap.
Cornwall Insight then predicts that between October and December, the cap will be £2,161 - around 27.9% less than prices set under the EPG.
Will the energy price cap replace the EPG?
Although no official statement has been made, a spokesman from Ofgem told MoneyWeek that it would be up to government to put households back on energy price cap rate if it turns out to be lower than the EPG.
So, the potential good news is there is a chance that your energy bill could fall by the summer, if not sooner. But we are still waiting for an official statement as to whether households will be put back onto the energy price cap.
As it stands, the EPG is set to be in place until March 2024 and lower prices will reflect a cost saving for the government.
What is the Energy Price Cap?
The energy price cap is the maximum price per unit that energy suppliers can charge households.
It is calculated and set by the energy regulator quarterly and is based on wholesale gas prices.
It is in place to protect consumers and to ensure suppliers do not overly profit.
But, with gas prices reaching all time high, the rate set by the cap was extortionate, making energy bills unaffordable for most households.
This is why we now have the EPG, a temporary measure which has so far shielded households from eye-watering prices.
Ofgem continues to set the energy price cap - but we are now reaching a point where this cap is potentially lower than the EPG.
Keep energy bills low
To help you keep energy bills low, we have gathered some top tips in our article looking at 13 ways to reduce your energy costs.
And if you're interested in the best ways to improve your energy efficiency and reduce costs, we explored radiators vs electric heaters, heated airers vs tumble dryers, and wood burning stove vs central heating.
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