Cost of energy will drop for households this weekend as price cap falls to £1,923 – here’s why you should submit a meter reading

Millions of households will see a welcome drop in energy prices from this weekend as Ofgem’s price cap will fall to £1,923 per year for the average home.

But to pay the correct bill, it is crucial that you provide your energy company with meter readings before the price cap goes up on October 1.

The Ofgem price cap limits the amount you can be charged for the gas and electricity you use if you have a variable rate and pay by direct debit.

Almost all UK households currently have energy bills capped by Ofgem’s price cap, which currently averages £2,074 and will fall by £151 per year from October 1.

The price ceiling is set four times a year by regulator Ofgem, and the next ceiling decision is in January 2024.

Here’s how the October 1 price limit changes will affect your energy bill.

How does the price ceiling affect my energy bill?

This depends on the type of tariff you have, your meter and how much energy you use.

Until October 1, the average variable-tariff household paying by direct debit will pay £2,074 a year, or £172 a month, in energy due to the price cap.

From October 1, that typical bill will drop to £1,923.

Ofgem said this is due to the falling price of wholesale energy, which companies like British Gas buy and then sell on to consumers.

But exactly how much you pay depends on your energy consumption. This is because the price cap only limits the maximum you can be charged for the units of gas or electricity you use.

The more devices you use, the more you pay, and vice versa. And with winter approaching, the heating in households across Britain is likely to be switched back on soon.

How your meter also affects your energy bill

If you use a prepayment meter the price cap will drop from an average of £2,077 now to £1,949 in October.

Those with a credit meter currently pay an average of £2,211, which will drop to £2,052 from October 1.

People with Economy 7 meters now face a maximum tariff of £1,400 for the electricity they use, and this will drop to £1,298 in October.

Any home that uses more than £3,000 of energy a year will have their bills capped by the government’s Energy Price Guarantee.

This is a government scheme whereby the state covers part of the gas and electricity bills for consumers.

It was launched at the £2,500 level in October 2022 and was increased to £3,000 in July 2023.

How does the price ceiling affect fixed costs?

The Ofgem price cap also regulates fixed costs.

The amount of the standing charge varies depending on factors such as where you live in the country.

For electricity, the average standing charge is 53 cents per day and this will not change on October 1.

For gas, the typical standing charge will increase by 1 cent to 30 cents.

Please provide the meter reading this week

It is important to give your energy company a meter reading before the price ceiling changes on October 1.

You will then pay exactly what you owe for the gas and electricity you use during the next billing period from October 1 to December 31.

Otherwise, unless you have a smart meter, your energy company will rely on making assumptions to calculate your bill, which may be slightly off.

It is of course more important to provide current meter readings just before the price ceiling rises, so that you do not pay too much.

But it is still important, even if the price ceiling drops, as it did on October 1, because you will then have absolute certainty about the amount of your energy bill. This means that you should not expect any unexpected bills when you finally provide the meter reading.

What is the future for energy bills?

Ofgem makes no predictions on how the price cap will change in the future, although chief executive Jonathan Brearley has warned customers that ‘I cannot offer any assurance that things will relax this winter’.

However, energy experts from analysts Cornwall Insight make predictions about the price of energy bills that are normally very accurate.

Cornwall Insight believes the average household will pay £2,032 from January 1, falling to £1,964 in April, £1,917 in July and then rising again to £1,974 in October next year.