Energy bills drop by hundreds of pounds today as Ofgem price cap comes into force | Personal Finance | Finance

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Today, energy bills are set to decrease by hundreds of pounds, providing some relief for households struggling with costs. The Ofgem price cap has dropped by around 12 percent, meaning energy bills for millions of Brits will become a bit cheaper.

The new price cap set by the energy regulator is now £1,690 for the typical household paying by direct debit. This is a drop from the January price cap of £1,928.

The April price cap is the lowest it’s been since February 2022 and will stay in place until June 30 this year, when it will be reviewed again. It’s important to remember that the £238 drop represents potential savings over a year, not just the three months the price cap covers.

However, despite its name, the price cap doesn’t actually limit the total amount you can pay for energy. Instead, it caps how much you can be charged per kilowatt of energy you use.

So, if you use more energy, your bills will be higher. How you pay for energy, like if you pay by direct debit or prepayment, also affects your overall bill, as there are different unit rates, reports the Mirror.

Starting tomorrow, the unit rate for gas for direct debit users is falling from 7.42p per kilowatt hour (kWh) to 6.04p per kWh. Similarly, the unit rate for electricity is dropping from 28.62p per kWh to 24.50p per kWh.

The Ofgem price cap also includes the standing charge – which is going up for people who pay by direct debit and on receipt of bills. This is a fixed amount that customers must pay on their energy bills no matter how much gas and electricity they use.

Standing charges are used to pay for things such as the upkeep of the energy grids and the amount varies depending on where you live in the UK.

The standing charge for gas for direct debit households will rise from 29.60p a day to 31.43p a day and the standing charge for electricity is rising from 53.35p a day to 60.10p a day.

Alongside the standing charge, Ofgem has also introduced a temporary additional payment of £28 a year to cover the cost of customers who fall behind on bills although prepayment metre customers won’t be affected by this extra charge.

Ofgem’s price cap covers 29million people who pay their energy bills by direct debit. There are different unit rates and standing charges for prepayment customers and those who pay on receipt of bills.

For those on prepayment meters, the price cap is falling to £1,643 a year. For those who pay on receipt of their bill, the figure is £1,796 a year.

Due to the lowering of standing charges for prepayment customers last year, the cheapest way to pay for energy now is prepayment meters.

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