When is the Ofgem energy price cap announced? And what it could mean for bills

Ofgem, the energy regulator, has announced the energy price cap for the period of July to September 2023.

The current Ofgem price cap is set every three months and has been placed at an annual £2,074 for a typical household paying by direct debit.

That is down from the £3,280 set for April to June, though during this period households were protected by the lower Energy Price Guarantee (EPG). 

The guarantee, introduced in October 2022, means a typical household's annual energy bill for gas and electricity is around £2,500. But, it isn't a total cap on what you could ultimately pay. 

Crucially, neither the price cap nor the EPG set an absolute limit on how much your bills can cost. It only limits the unit cost of energy, setting a maximum price per kilowatt hour (kWH) energy firms can charge you for the gas and electricity you use, plus standing charges.

Essentially the government is subsiding the difference between the energy price cap and the EPG. 

The next quarterly energy price cap update will be on 25 August 2023, and covers October - December.

So, why does the Ofgem price cap matter? And why is it important that it has dropped below the EPG rate?

Ofgem energy price cap 

Ofgem price cap vs Energy Price Guarantee - what's the difference?

Before the Energy Price Guarantee was introduced, costs were capped by the energy regulator Ofgem. 

It sets the maximum price energy suppliers can charge consumers on variable tariffs for each kilowatt hour (kWh) of energy they use. It is set every three months and is influenced by the wholesale price energy suppliers have to pay. 

It was always intended to be an emergency backstop to prevent energy firms from overcharging customers on variable tariffs. And fixed tariffs were usually the best way to secure cheaper energy bills.

But the energy crisis turned the market on its head. In the face of the spiralling cost of wholesale gas, the Ofgem price cap became unaffordable, which is why the government replaced it with the Energy Price Guarantee. 

In other words, the energy price cap was getting so out of hand it too had to be capped, with the government stepping in. 

Right now, the EPG is protecting most households from even higher energy prices, but from July it will be undercut by the energy price cap. As a result, the price cap will take over as the main limit on our energy bills.  

What does new Ofgem energy price cap mean for your bills?

Until July, the typical household's annual energy bill will be limited by the EPG to around £2,500. And, come July, that annual bill for typical energy costs will drop to £2,074.

According to forecasts from the analyst Cornwall Insight, the price cap will drop once again for the final quarter of this year to £1,960. It has predicted that the energy price cap will then move to £2,026 for the first three months of 2024.

Read more

• How to cut energy costs with minimal effort
• What the forecasters say: will energy prices fall this year? 
• Energy suppliers also have hardship funds to help their customers in need.
• You may also find our article on unfair direct debit increases useful. See how The Money Edit helped one reader bring her direct debit down after her energy firm increased it from £117 to £369.