The energy price cap has been cut and MailOnline and This is Money's new online calculator today reveals how much your energy bills should drop by on July 1.
Ofgem today confirmed its price cap for the average household's annual energy bill will fall to £2,074 - down from its current £3,280.
Crucially, this pulls the energy price cap below the £2,500 energy price guarantee and will mean the average UK household saves around £426 on gas and electricity.
The cap is set for the average household and individual costs depend on households' energy usage - our calculator lets you work out what it means for your bills.
Use MailOnline and This is Money's energy bills widget – which we have built withfinance management system Nous–to work out how you will be impacted by the price cap drop.
Enter some brief details on how your home is powered, whether you have a prepayment meter and your current monthly payments to find out how much cheaper your bill will become.
Energy prices have spiked to record levels over the past 18 months, as disruption from the aftermath of Covid lockdowns combined with Russia's invasion of Ukraine sent energy costs sky high.
The war in Ukraine saw wholesale gas prices soar globally, with Ofgem's price cap rising from£1,162 a year in August 2021 to a peak of £4,279 in January this year.
Since October 2022, customers have been partly shielded by the Government's Energy Price Guarantee, which limits annual energy costs to £2,500.
All households in England, Scotland and Wales also received £400 from the Government to offset soaring prices over the winter.
This will change in July as Ofgem drops the price cap to a level below the energy price guarantee. There is a hope that falling energy prices will also trigger a return to the possibility of switching energy suppliers and a competitive fixed rate market.
Despite the cap's fall, campaigners have warned households will not feel full relief for another seven years, with energy bills set to remain high until at least 2030.
'We do not currently expect bills to return to pre-2020 levels before the end of the decade at the earliest,' energy consulting firm Cornwall Insight said.
Fuel poverty charity National Energy Action (NEA) added that, for many, bills will still be 'unaffordable' due to the Government's move to cut winter support packages.
> Energy price cap guide: When will your bills fall and by how much?
Ofgem has today lowered the Energy Price Cap to £2,074 - meaning UK households will be saving up to £450 on their gas and electricity bills
It is vital to remember that Ofgem's price cap does not put a maximum sum on the amount a household will pay for their total energy bill
The price cap instead limits sums of money providers can charge their customers per unit of gas or electricity, meaning those who use more energy pay more.
> How to save money on energy and how your bills work
Greg Marsh, chief executive and co-founder of household money-saving tool Nous.co, said: 'Most households will see their energy bills come down from July, but unfortunately this isn't the end of the painful squeeze on incomes.
'Bills will be close to double the levels seen before the energy crisis, and other prices such as groceries continue to soar.
'Energy minister Grant Shapps and regulator Ofgem need to do much more to encourage energy suppliers to pass on falling wholesale prices to consumers.
'We mustn't forget that millions of people are seriously struggling to pay their bills.'
Ofgem is expected to drop to its energy price cap from £2,500 to £2,074 this July, experts have said
The Government's £400 winter discount, which was paid in six instalments to every household, ended in March.
Now, only those in receipt of means-tested benefits, pensioners and those with disabilities are set to receive further help with their energy bills, amounting to £900, £300 and £150 respectively.
The standing charge – the roughly £300 paid each year by households just to access gas and electricity – is also controversial.
The NEA warned that while a cut to the price cap 'might seem like good news', bills in July would be comparable to last winter due to the end of the Government's support.
NEA chief executive Adam Scorer said: 'Coming out of winter, most people will welcome any respite from record high prices, but it still leaves prices more than 80 per cent higher than the start of the energy crisis and two million more households trapped in fuel poverty.
'More than two and a half million low income and vulnerable households are no longer receiving any Government support for unaffordable bills. For them, the energy crisis is far from over.'
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THE ENERGY PRICE CAP: WHAT IS IT AND WHAT DOES IT MEAN FOR MY BILLS?
Despite falling wholesale energy prices making their way through to bills, households are still facing eye-watering costs that remain well above pre-pandemic levels.
What is Ofgem's price cap, how does the Government's Energy Price Guarantee affect it, and what does it all mean for household bills?
- What is Ofgem's price cap?
The energy price cap was introduced by the Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.
It aims to ensure that prices for customers on default energy tariffs are a fair reflection of the cost paid by suppliers for wholesale energy, and that the profit firms make is capped.
Ofgem sets its cap every three months as the average amount paid by the typical household. This is currently £3,280, but the regulator has announced that it will drop to £2,074 with effect from July 1.
It is important to note though that Ofgem's cap does not set a maximum amount for the actual bill households receive - those who use more than the average amount will pay more, and those who use less will pay less.
Energy is regulated separately in Northern Ireland, where bills will be held at £1,950 per year for an average household.
However, since October last year this has all been overridden by the Government's Energy Price Guarantee.
- What is the Energy Price Guarantee?
Then-prime minister Liz Truss announced a temporary Energy Price Guarantee (EPG) to protect households when wholesale prices soared after Russia's invasion of Ukraine, leading to fears bills could hit £6,000 a year.
Under the EPG, which took effect in October, the Government sets a maximum average household price for gas and electricity and pays the difference to customers' suppliers. This has been set for a typical household at £2,500, even though Ofgem continued to set its own cap at at higher level.
As Ofgem's price cap will be lower than the EPG from July, the price cap will once again determine household bills, which will drop by an average of £426 a year.
Again though, this is not a maximum cap on what households will pay. Those who use more energy will pay more.
- Why is Ofgem's price cap falling?
The fall reflects recent drops in wholesale energy prices - the amount energy firms pay for gas and electricity before supplying it to households.
However, despite the drop from July from the sky-high prices of the past two years, the figure remains more than £1,000 a year higher than pre-pandemic levels.
- Will energy bills continue to fall?
Consultancy firm Cornwall Insight predicts that July's fall will be followed by a further drop in October, when it expects the typical annual bill to be £1,976.
Unfortunately, it currently believes the typical bill will rise again in January to £2,045.
It does not expect energy prices to return to pre-Covid levels before the end of the decade at the earliest.
And it warned that prices remain subject to wholesale market volatility, with the UK's reliance on energy imports meaning that geopolitical incidents could continue to have a significant impact.
- Will this mean the return of switching?
Cornwall Insight said it hoped to see the reappearance of more competitive fixed-rate energy tariffs as prices begin to stabilise, meaning it could soon be worthwhile for consumers to consider switching again.
Unlike variable tariffs, they are unaffected by the cap.
Consumer groups and regulators say that could be good news for consumers, but warn that such deals will not suit all circumstances, and anyone who locked into a fixed deal would miss out on falling variable prices.
Which? Energy editor Emily Seymour said: 'If prices start to stabilise, we may see some providers offering competitive fixed price energy deals for the first time in well over a year.
'As a rule of thumb, we wouldn't advise fixing any deals which are significantly higher than the price cap or longer than 12 months as this runs the risk of your deal continuing into a completely different future market.
'It's also important to take into consideration any exit fees, as we've seen some companies charge large amounts if you wish to leave your contract early, should a better deal come along.'
- What if I'm not on a standard default tariff?
Chancellor Jeremy Hunt confirmed in the Spring Budget that energy costs for prepayment households would be brought in line with those who pay by direct debit.
This means the cap is same for both forms of payment.
However, those who pay via cash, cheque or bank transfer, usually every three months, will pay significantly more.
- Is there any extra support available if I'm struggling to pay?
The £400 discount which all households in England, Wales and Scotland received to offset soaring winter bills has ended.
Only those in receipt of means-tested benefits, pensioners and those with disabilities are currently set to receive further help with their energy bills, amounting to £900, £300 and £150 respectively.
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