Ofgem's energy price cap.
Ofgem's price cap.
On 23 November 2023, Ofgem announced that the price cap, for a typical household who use electricity and gas and pay by Direct Debit, would be £1,928 from 1 January 2024. This figure uses Ofgem’s new definition of ‘average energy use’ known as the Typical Domestic Consumption Values (TDCV). Ofgem sets the maximum amount that suppliers can charge for each unit of electricity and gas but not the total bill, so if you use more, you will pay more.
Ofgem’s price cap sets a maximum unit price for each kilowatt hour of energy used by customers on a standard variable tariff (SVT). The specific unit rates each customer sees will vary by region and payment type. This new level from 1 January 2024 will keep the price cap below the level of the government’s Energy Price Guarantee (EPG). This means the price cap continues to determine how much energy companies can charge and not the government's Energy Price Guarantee.
From 1 January 2024 Ofgem says that the price per kilowatt hour (KWh) for customers on the default tariff (SVT) will be 28.62p per KWh for electricity and 7.42p per KWh for gas. Ofgem has changed the daily standing charge to 53.35p for electricity and 29.60p for gas. Standing charges vary by supplier, where you live, how you pay and what meter you have.
The price cap applies to customers on a SVT. If you’re on a fixed tariff, the price cap won’t affect you. You can log in to your account and see which tariff you're on.
The next price cap review is in February and will be effective from 1 April 2024.
Ofgem has changed their definition of ‘average energy use’. Ofgem’s old definition of average energy use, known as the Typical Domestic Consumption Values (TDCV) has changed to more closely reflect the current average energy use. Typical annual household consumption is now estimated to be 2,700 kWh a year for electricity, and 11,500 kWh a year for gas. Learn more about Ofgem’s average electricity and gas usage.
What this means for customers.
Standard variable tariff (SVT) customers.
Customers on a standard variable tariff (SVT) will see their unit prices rise to be in line with those set by Ofgem from 1 January 2024.
The specific unit rates each customer sees will vary by region and payment type. This is to reflect the different costs to suppliers of providing energy to homes and servicing the different payment methods. The regional variations for electricity, and payment type variations, have been adjusted by Ofgem in the most recent price cap calculations (23 November 2023).
We will adjust standard variable tariffs automatically. Customers on standard variable tariffs do not need to take any action.
Fixed tariff customers.
Fixed tariff customers will remain at the prices they agreed when they took their contract out. Fixed customers do have the option to switch to the Next Flex tariff.
Prepayment meter customers.
For prepayment meter customers, Ofgem's price cap will be applied to the price you pay for each unit of energy. The unit price varies regionally, by payment method and depends on the time of day that the energy is used but the new unit prices will rise in line with the price cap from 1 January 2024.
All customers will see an increase in their unit prices from 1 January 2024. For E7 customers there will be an increase to both day and night unit prices.
On 15 March 2023 the Chancellor announced in the Spring Budget that people using prepayment meters will receive additional support from 1 July 2023 to bring their bills in line with people who pay by Direct Debit. This means that from 1 July a typical customer on a prepayment meter will pay the same amount as an equivalent customer paying by Direct Debit until 31 March 2024.
This will be delivered through the Energy Price Guarantee by providing a unit rate discount. The discount incorporates the differences between prepayment meter and Direct Debit costs in both unit rates and standing charges.
From 1 July to 30 September 2023, the Energy Price Guarantee prepayment meter discount will be applied to gas unit rates only, as the combined unit rate and standing charge for electricity prepayment meters will already be less than the equivalent for Direct Debit. The gas unit rate discount will therefore be (excluding VAT):
0.249p/kWh for gas from July to September 2023.
The specific prepayment meter unit rate each customer sees will vary by region. See the full list for July-September 2023.
From 1 October to 31 December 2023, the Energy Price Guarantee prepayment discount will be applied to standing charges. The standing charge discount will be applied to both electricity and gas tariffs:
4.5372p for electricity from October to December 2023
5.9432p for gas from October to December 2023
The specific prepayment standing charges each customer sees will vary by region. See the full list for October to December 2023.
From 1 January to 31 March 2024, the Energy Price Guarantee prepayment discount will be applied to standing charges. The standing charge discount will be applied to both electricity and gas tariffs:
4.5083p for electricity from January to March 2024
6.7565p for gas from January to March 2024
The specific prepayment standing charges each customer sees will vary by region. The discount will be applied automatically to the price that is set on the meter. You do not need to contact your supplier to apply or use vouchers.
Ofgem’s price cap will see unit prices rising and standing charges changing. The specific unit rates and standing charge each customer sees will vary by region and payment type.
Energy Price Guarantee.
The price cap continues to determine how much energy companies can charge and not the government's Energy Price Guarantee.
To limit the amount customers' bills go up by, the government will compensate energy firms for the difference between the wholesale price for gas and electricity they pay and the amount they can charge customers. From 1 October 2022 until 30 June 2023 the government supplemented what customers paid for energy which meant that a typical household saw an annual bill of £2,500.
Customers still paid for the gas and electricity they used. But the government's Energy Price Guarantee limited the price that we could charge for each unit of energy. The scheme didn't cap your bill at £2,500, your bill amount was still based on how much energy you used. Visit our dedicated Energy Price Guarantee page for full information on how the EPG affects customers. With Ofgem’s price cap dropping below the government’s EPG from 1 July (£2,074 announced 25 May 2023), it effectively ended the government’s financial support for residential energy customers. Customer’s prices are now determined by Ofgem’s price cap. The government says the EPG will remain in place until April 2024 but the threshold rose to £3,000 from 1 July 2023.
What is the price cap?
The price cap was introduced by the government in 2019 as backstop protection for customers who are on an energy tariff with standard variable rates. Electricity and gas prices are reviewed and updated by the energy regulator Ofgem.
The price cap is calculated and set by Ofgem to reflect changes in industry costs and the graph below shows how these have changed since the last review. The price cap level is set for customers in England, Wales and Scotland. Retail energy prices in Northern Ireland are not subject to a cap. Ofgem review the price cap every three months.
How the Energy Bills Support Scheme worked.
This government scheme has ended. In May 2022 the government announced several support measures to help households with rising energy bills. The main measure, announced by the Chancellor, was £400 off electricity bills for domestic customers across England, Wales and Scotland. Known as the Energy Bills Support Scheme (EBSS) this money was credited to customers accounts from 1 October 2022. This money does not need to be paid back. There’s more information on our dedicated Energy Bills Support Scheme webpage.
Customers saw a discount of £66 applied to their energy bills in October and November, and £67 a month from December to March 2023. The scheme ended on 31 March 2023.
Customers received the money differently, depending on how you pay for your fuel now:
Fixed Direct Debit customers received the money automatically as a deduction to their monthly Direct Debit.
Pay on receipt of bill customers and regular cash payment customers saw the money automatically applied as a credit to their energy accounts in the first week of each month. This showed as a credit in the payments section of their monthly bill.
Smart prepayment customers saw the money credited directly to their meters as a top up in the first week of each month.
Traditional prepayment customers were provided with vouchers usually by the middle of each month. Customers needed to redeem these at their usual top-up point in a similar way to the Warm Home Discount by 30 June 2023.
The government has published more information about the Energy Bills Support Scheme on their website.
What other measures are there?
A £900 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits. This is an increase from £650 for the last year. The first payment of £301 will be made in the spring, £300 in the autumn and a final £299 in the spring of 2024.
6 million households with disabilities will receive a £150 cost of living payment in the summer (same as 2022).
8 million pensioner households will receive £300 (same as 2022) during the winter of 2023-24.
The £400 discount off energy bills (EBSS), which was paid in monthly instalments over the winter, won’t be continued.
The above measures announced by the government are for the tax year 2023-24 were announced in the Autumn Statement (17 November 2022). These took effect on 5 April 2023.
In the Autumn Statement on 22 November 2023 the Chancellor announced that benefits will increase from April 2024 by 6.7%, the inflation rate for September 2023. This applies to working-age benefits such as means-tested benefits such as Universal Credit, and disability benefits.
Am I affected by the price cap?
The price cap applies to you if you're on one of our standard variable tariffs. Between October 2022 and June 2023 residential customers were protected from the price cap rises by the government’s Energy Price Guarantee (EPG). However, with the new price cap remaining below the EPG, customer’s bills will continue to be determined by Ofgem’s price cap.
What support is available for E.ON Next customers?
This is a worrying time for everyone as the cost of living remains high. We understand that you may be struggling to pay and have a number of resources to help.
E.ON Next Energy Fund.
The Priority Services Register (PSR)
Government support schemes.
External debt-advice resources.
Help paying your bills with Paylink.
Health and wellbeing resources.
How can I get help from you with making this decision?
We recommend checking your tariff online at the end of the month once any new prices have been set and waiting to contact us until then.