Changes to energy price cap between 1 October to 31 December 2023
Changes to energy price cap between 1 October to 31 December 2023
The maximum allowable rates for energy suppliers to charge per unit of energy undergo a periodic review every three months. Starting from October 1, 2023, there will be a decrease in the annual energy cost for a typical household that uses both gas and electricity and pays through Direct Debit, bringing it down to £1,923 per year.
The adjustment in the energy price cap considers the energy consumption patterns of an average household. More information about typical household energy consumption and the methodology used to calculate the price cap can be found on our page explaining average gas and electricity usage.
The energy price cap is determined by various components, including the wholesale costs of gas and electricity, network supply costs, and VAT. Under the energy price cap, energy suppliers are allotted a margin for profit, excluding interest and taxes, above and beyond their energy supply costs.
Starting from October 1, 2023, this profit margin allowance will increase by an average of £10 per customer annually. Ensuring reasonable profits is crucial for the energy sector as it enables suppliers to invest in improving customer service and care. It also allows them to use pre-tax income to offset potential increases in energy prices, reducing the risk of insolvency. This reasonable profit allowance aims to enhance financial stability among energy suppliers and safeguard consumers in the future.
You can review the price cap levels for October to December 2023 and compare them with those from July to September 2023. Additional information about the price cap policy is available.
For individuals who use prepayment meters to pay for their energy, there are policy changes effective from October 1, 2023. These changes will reduce their annual costs by £42. Additionally, a 12-month allowance will be introduced to cover increased debt costs associated with providing extra support credit to individuals at risk of having their energy supply disconnected due to their inability to top up their meter.
Despite these adjustments, the price cap for prepayment meters will remain higher than that for Direct Debit payments. However, the government will provide support through the Energy Price Guarantee until the end of March 2024 to bridge this difference. Beyond that period, the
government is seeking input on how to equalize standing charges for those using prepayment meters or Direct Debit payments. This change is expected to be implemented by April 2024. Your feedback on this matter is welcome through the standing charges lateralization consultation.
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