This reflects the further stabilisation of the wholesale energy market. Its high prices have contributed to the high energy bills that UK energy customers have experienced over the past year and a half.
While bills are still at historic highs, they’re significantly lower than they were this time last year. At that point, the government had to introduce its Energy Price Guarantee, which capped energy bills at £2,500, and its Energy Bills Support Scheme, which provided customers with a £400 discount on energy bills over a six-month period. Both have now ended.
Following the previous price cap, suppliers brought a small number of fixed deals back to the market. This helped provide customers who signed up to one with price certainty given the continued volatility of the market.
Richard Neudegg, director of regulation at Uswitch.com, said: “Falling energy prices are a relief as we enter the colder months, but the drop could be short lived as Ofgem will review the cap again before the depths of winter.
“Rates for the average home will be 7% lower from October to December, but energy prices remain volatile and are predicted to rise again in January.
“Despite lower unit rates, energy use will be higher, so the average household may only save around £47 next quarter compared to current rates¹. When we also consider that there is no universal Government bill support this winter, the average household will actually be paying more than they were over the same period last year².
“We’ve landed in an environment in which we are expected to simply accept expensive energy costs.
“There are questions that Ofgem and the Government need to answer on whether the current regulatory rules are the best way forward to bring back cheaper energy for households.
“Ofgem’s ban on acquisition-only tariffs was originally implemented to freeze discounting during the peak of the energy crisis, but now means that suppliers have no incentive to offer the best pricing possible.
“The price cap itself also deters suppliers from innovating and delivering better deals. It needs reforming in a way that offers protection for households while putting real pressure on suppliers to do better. Half of the population isn’t even sure what the price cap is or does³.
“Instead of regulating the exact price of energy every three months and banning cheaper deals, we should set the principle we want to achieve in regulation - that a standard tariff is priced fairly, based on costs.
“This could require all suppliers to offer a transparent standard tariff that provides value for money to households, but also gives them the ability and incentive to do things better. Targeted support should also be available to the most vulnerable.
“For consumers who would like more price certainty over the winter months, there is still an opportunity to lock in a reasonably priced fixed deal before rates potentially rise again.”
What should energy customers do now?
Manage energy use
As we head into winter without a material reduction in energy prices, the advice to customers remains the same as it did last winter: reduce your energy use as much as possible in a safe way to keep bills at a manageable level. This means doing things like turning the thermostat down by a single degree (rather than turning the heating off entirely) and not using the tumbledryer if possible. You can find a list of energy-saving tips here.
Run an energy comparison
After the previous price cap announcement in May, some suppliers did bring deals back to market, but these offered only minimal savings against prices that remained extremely high. Most of these deals are still available but switching might not be right for everyone. Run an energy comparison with Uswitch so you can compare your current deal against potential switching options and work out whether it makes sense for your circumstances
The average household with typical consumption will pay £47 less in October to December 2023, when compared to Q3 (Jul to Sep 2023) price cap rates. This is based on average consumption over the period of October to December using current TDCVs.
The average household with typical consumption will pay £14 more in October to December 2023, when compared to Q4 (Oct to Dec 2022) EPG rates, including the Government Energy Bill Support of £66 per month. This is based on average consumption over the period of October to December using current TDCVs.
Earlier this month, Uswitch and Opinium surveyed 2,000 energy bill payers in the UK to understand their views on the price cap. Over half of energy consumers were unaware of what the price cap does, while over two thirds did not realise that their prices can change every three months. This will come as a shock for many - particularly now that the Energy Price Guarantee is no longer in place.
