Understanding the Energy Price Cap
The energy price cap is set to provide some relief to households this summer as energy bills are expected to decrease by £137 annually. According to predictions from Cornwall Insights, the average annual cost for gas and electricity is projected to drop to £1,732 starting this July, reflecting a 7% reduction from the price cap implemented in April.
This upcoming decrease represents the first decline in energy bills for customers in over three quarters. Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, remarked, “This latest forecast brings much-needed relief to households and is a positive indicator that energy prices are trending in the right direction.” However, experts caution that another rise in bills is anticipated in October, before another decline at the start of 2026.
Typically, consumers tend to spend less on their energy suppliers during the spring and summer months. Dr. Lowrey added, “While we are seeing a drop in prices, it’s important not to become overly optimistic. The recent fluctuations in wholesale markets can significantly impact energy bills in a very short time frame.”
Currently, around 26 million households in England, Wales, and Scotland are on standard variable tariffs (SVTs), which are directly influenced by the price cap. This news comes as these households brace for an average increase in energy bills by £111 per year, or approximately £9.25 per month, starting in April. This rise is attributed to a surge in gas prices across Europe, driven by a decline in gas storage levels throughout the continent.
Despite this increase, average energy bills remain significantly lower than during the peak of the energy crisis, which was exacerbated by Russia’s invasion of Ukraine in February 2022. This conflict caused a dramatic spike in an already volatile wholesale energy market, resulting in higher costs for both suppliers and consumers. Prior to this energy crisis, the standard annual energy bill was around £1,084.
How Can I Calculate My Energy Bill?
Calculating your own energy bill is straightforward if you have the right information. Here’s how you can do it:
- First, identify your unit rate for both gas and electricity, which is typically expressed in pence per kilowatt hour (p/kWh).
- Next, find out the standing charge for each fuel type. This is a daily charge that is applied throughout the year, regardless of your actual usage.
- Check your previous bills to note your annual energy usage.
With these details in hand, you can calculate your gas and electricity costs separately:
- Multiply your energy usage (in kWh) by the corresponding unit rate (in p/kWh) to determine your usage costs.
- For the standing charge, multiply the daily charge by 365 and add this to your usage costs to find your total annual energy costs.
- Finally, divide this annual total by 12 to estimate your monthly payment from April 1st onwards.