Energy price freeze - what does it mean for the October energy price cap?

New prime minister Liz Truss announced this week that energy prices will be frozen until 2024, capped at £2,500, based on typical use - cancelling out the 80% increase that was expected when the October energy price cap kicked in.

Truss’s announcement means typical energy bills will be capped at £2,500 for typical use (if you use more, you will pay more) from 1 October in 2024. In addition, eligible households will also get the £400 energy grant promised by chancellor Rishi Sunak earlier this year.

It means, instead of the October energy price cap rising to £3,549, the average household can now expect to pay around £2,100 a year - only slightly higher than the current price cap of £1,971. This is an increase of 6.5% more than you currently pay from 1 October.

Truss’s freeze, known as the energy price guarantee, temporarily replaces the energy price cap, which is set by the regulator Ofgem.

Truss’s energy price guarantee is in place until 2024. We do not yet know what the future impact of the energy price cap will be and if energy prices will have stabilised once the freeze comes to an end.

Commenting on the changes, a spokesperson at Ofgem said: “Ofgem welcomes this significant and unprecedented support for energy consumers across the country. It’s been clear to Ofgem and the government since we announced the new price cap that the new government would have to act urgently and decisively to support consumers and this package of support will be welcomed by millions across Britain. 

“Given the scale of the crisis and the challenges that lie ahead, it is the right time to assess the approach that has been taken.”

(Given the latest announcement, we are in the process of updating our energy calculator below to reflect prices from 1 October)

Will the new cap apply to those using heating oil?

Truss said there will be funding to ensure there is equivalent support for those who use heating oil, live in park homes and use a heating network.

We do not yet know the details of this fund, but we will update you here as soon as we know more.

Personal finance editor of The Money Edit, Adam French, said: “Although there will be a sigh of relief for households who will no longer be subject to an 80% increase, many households will still find paying for energy bills at the new cap rate set by Truss difficult, especially as inflation sits at a 40 year high and other living costs have spiralled.

“It is certainly welcome help, but more needs to be done to help vulnerable and low income households - particularly those with higher energy needs or on a prepayment meter. We also need urgent clarity for those who are not on the electricity grid.

“The government must also ensure the temporary suspension of green levies doesn't delay measures to improve home energy efficiency such as insulation, which will bring down costs for households in the long term."

HOW CAN I SAVE MONEY ON MY ENERGY BILLS? 

The best way to keep your costs low at the moment is to reduce your overall energy consumption. We explore how to keep your bills low in our article on how to cut your energy costs as gas and electricity bills go up.

Also, take a look at how one family attempts to mitigate their rising bills by using dehumidifiers, which has cut their energy consumption by 30%.

If you are struggling with payments, take a look at our article on help with bills to see what help is available. 

It’s also important to speak to your energy supplier as soon as possible if you’re behind on your bills as they may be able to help, such as with a hardship grant or working out a more affordable payment plan. 

Need to talk? We know this is a difficult time for many people as household budgets come under pressure. If you need to talk to someone, there is free support from the Samaritans (opens in new tab)(opens in new tab). You can call them free on 116 123.

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