Energy Price Cap Drop April 2024: What You Need to Know

Energy Price Cap is set to drop by 12.3% from 1st April 2024, and (partly to better control energy debt) prepay finally emerges as the most economical payment method. 

UPDATE: (20th May 2024)
The Energy Price is predicted to fall by a further 6.9% from 1st July 2024, saving the average UK home £116 on their annual energy bills.

The Energy Price Cap determines the bills for most households across England, Scotland, and Wales (unless you're on a fixed or unique tariff), with most providers charging the maximum allowed. This cap is adjusted every quarter, largely reflecting the average wholesale costs, albeit with a delay. For instance, the upcoming cap for April 2024 to June 2024 is based on the wholesale rates from November 2023 to February 2024.

The latest announcement reveals that from 1st April 2024, for every £100 currently spent by Direct Debit on energy, the cost will reduce to £87.70 saving you £12.30. So, if your current annual spend on your combine gas and electricity is £1,000, this will drop to £877.  

This is a positive step, and there's speculation about further reductions come July. However, energy prices remain significantly higher than pre-crisis levels.

To help digest all this news, we've put together these key take-aways: 

1. Prepay Savings: From April 2024, prepayment becomes about 3% cheaper than Direct Debit, reversing its historical costliness. This is significant for those on lower incomes who benefit from more controlled spending. The difference, already present due to government subsidies, will widen with actual pricing adjustments.

2. Direct Debit Concerns: Direct Debit's standing charge is rising to £334 from £303, despite overall bill reductions. This disproportionately affects low-usage households, including many elderly, with a substantial fixed annual charge.

3. Switching Deals Outlook: With the Market Stabilisation Charge ending in April 2024, switching deals might rebound, offering consumers more options. However, Ofgem's extension of the Ban on Acquisition-only tariffs may dampen immediate market competitiveness.

4. Eon Next Discount: The Eon Next Pledge tariff offers a 3% discount under the Price Cap for a year, available to Direct Debit customers who have or get a smart meter. Initially, customers must switch to Eon Next 'Flex' before applying for the discount.

Is this all good news for UK energy customers?

Despite the welcome news that energy bills will fall, there is still plenty of anger and frustration in the energy sector, not to mention because this 12.3% reduction is somewhat overshadowed by the fact wholesale energy prices have fallen by 62.7% in the past 12 months and 33.7% since the start of 2024.

To add to the frustration is the fact that the energy regulator - whilst they have agreed to abolish the 'Market Stabilisation Charge' (essentially a charge an acquiring energy supplier must pay to the supplier losing the customer), they have decided to extend the 'Ban on Acquisition-only Tariffs' by another 12-months with a possible review to extend for 6-months. This ban prevents suppliers from offering discounted tariffs to new customers, meaning existing customers may miss out. However, in a market where the only points of differential are customer service and price, i.e. gas is gas and electricity is electricity, this once again stifles innovation and competition in a market that is frankly screaming out for it.

Our Chief Executive Officer - Scott Byrom, said, "I struggle to see who this decision benefits other than the large energy suppliers who, throughout this "energy crisis", have acquired millions of customers from failed energy suppliers, announced eye-watering profits and are more than happy for competition to collapse ensuring they keep the vast majority of customers on, what should be viewed as, expensive standard variable tariffs". He continues "Whatever the reasoning, Ofgem should be transparent and explain to consumers why they have taken this decision".