Ofgem price cap explained including how much your energy bills will go up

23 November 2023 , 07:34

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Energy bills are to rise again in January (Image: Getty Images/iStockphoto)

Ofgem has announced its new price cap and it means your energy bills will rise slightly again in January.

The price cap will increase from £1,834 a year to £1,928 for a typical dual fuel household paying by direct debit. This marks a rise of £94, or around 5%. You’ll be paying the price cap if you’re on a standard variable rate (SVR) tariff.

But working out how much your new energy bill will be isn't completely clear cut - this is because it all depends on how much gas and electricity you use. There isn't actually a total cap on what you can pay for energy.

The Ofgem price cap limits what you pay for each unit of gas and electricity that you use, plus it sets a maximum daily standing charge. This means your total bill may be more or less than the headline Ofgem figure - but to work out a rough increase, add on around 5% to what you currently pay.

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Standing charges are a fixed daily amount you have to pay for energy, no matter how much you use. The price cap figure is used to describe what someone with typical energy consumption can expect to pay each year, based on how much Ofgem reckons the typical household uses.

Ofgem assumes the average household consumes 2,700 kwh of electricity and 11,500 kWh of gas over 12 months. There are slight regional variations in terms of the rates you're charged under the price cap, with headline numbers used to give an average across England, Scotland and Wales.

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How you pay for your energy will also affect your overall bill. The price cap for the typical household with a prepayment meter is rising to £1,960 a year. However, the Government is continuing to add a small subsidy to the prepayment price cap, after promising these households won't pay more than those on direct debit.

For those who pay on receipt of their bill, the figure is going down from £2,058 a year. The new price cap will cover from January 1 until March 31 and covers around 29 million people in England, Scotland and Wales.

Levi Winchester