27 June 2023 , 08:41
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The cost of energy will drop from this weekend - but how much will your bills go down exactly?
Ofgem's July price cap will be introduced on Saturday which will see the average yearly household energy bill sit at £2,074 - down from the current level of £2,500 a year.
You must be wary that Ofgem's price cap is not a cap on energy bills - so this means what you pay will depend on how much energy you use.
Ofgem’s calculation for an average or medium household is based on a 2-3 bedroom house with 2-3 people living in it using 12,000 kilowatt hours (kWh) of gas and 2,900 kWh of electricity a year.
Ofgem says the move will give customers an annual saving of around £426 - but again the amount you save depends on how you pay for your usage and how much your bill is now.
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You can pay for energy in a few different ways, these are:
- Direct debit
- Receipt of bill
- Prepayment meter
The majority of Brits pay their energy bill by direct debit as it is very simple, once a Direct Debit is set up on your account, the money will be automatically taken out on an agreed date.
Paying on receipt of bill is the most traditional form of payment because you pay exactly for what you have used.
Your energy supplier sends you a bill for the energy you have used, and you pay it. You can arrange for bills to be sent monthly or quarterly - how this is slightly more expensive than direct debit as no discounts are offered.
With prepayment, you pay for your energy before you have used it often by topping up the meter at a shop or online.
Prepayment meters are usually more expensive because they were covered by a higher price cap.
However, from July the price cap for prepayment meters will be the same as those for direct debit.
How much will my bills drop by?
Under the current price guarantee, the unit rate for energy sits at:
- Gas - 10.31p per kilowatt hour (kWh)
- Standing charge - 29.11p per day
- Electricity - 33.21p per kWh
- Standing charge - 52.97p per day
Direct debit
From July, a typical household will pay lower unit rates and standing charges - although you should also be aware that rates and standing charges are averages, which vary by region.
You should always check with your energy provider about the exact rates you are being charged.
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A typical household will pay £2,073.98 a year from July if they pay the following rates:
- Gas - 7.51p per kilowatt hour (kWh)
- Standing charge -29.11p per day
- Electricity - 30.11p per kilowatt hour (kWh)
- Standing charge - 52.97p per day
This would be a saving of £426.02 from the current Government Price Guarantee of £2,500.
Receipt of bill
A typical household that pays for energy through receipt of bill will see costs sit at around £2,211.63 from July 1, based on these charges.
- Gas - 7.91p per kilowatt hour (kWh)
- Standing charge -34.34p per day
- Electricity - 31.72p per kilowatt hour (kWh)
- Standing charge - 59.51p per day
This would be a saving of £288.37 from the current Government Price Guarantee of £2,500.
Again you should take note that those paying receipt of bill are paying higher than the £2,500 cap.
Prepayment meters
The average household on a prepayment meter will see their bills drop to £2,045.90 in July, based on the following average charges:
This would be a saving of £454.10 from the current Government Price Guarantee of £2,500.
Again you should take note that those paying receipt of bill are paying higher than the £2,500 cap.
If you want to look at an estimate of what your energy bills could be from July, then you can check using the Money Saving Expert website's energy calculator here.
All you need to do is to enter how you pay, how much energy you use - either through your annual usage in kWh or monthly spend - and what region you live in.