December, 2023
The UK’s energy regulator, Ofgem has announced an increase to the energy price cap that will come into effect for bill payers from January 1, 2024. Octopus will not increase standing charges for Flexible Octopus customers.
What is the energy price cap?
The price cap limits the amount an energy supplier can charge for units of gas and electricity.
It is often communicated as an annual figure based on the ‘typical consumption’ of a dual-fuel household that pays for their energy bills by direct debit. Customers’ actual bill amount will depend on how much energy they use, so those who use more, will pay more.
What did the announcement say?
On the 1st January the Ofgem price cap will increase from £1,834 to £1,928.
This means that the unit rate for gas and electricity that customers are charged on a standard variable tariff will be slightly higher. Octopus standing charges will not be raised in January.
It is important to note that this winter your bills could continue to feel high as the government has ended the Bill Support Scheme which saw £400 worth of payments added to customers balances last winter.
If you’re struggling to pay we have lots of support on offer.
Why are unit rates increasing?
We’re committed to fair prices that truly reflect the cost of the energy we supply to you. The wholesale energy market has continued to be volatile in 2023 and the slight increase in unit rate is due to the cost of wholesale gas increasing. This has been impacted by world events including continued and escalating conflict in Europe and the Middle East.
What additional support is on offer?
From the government:
Full information can be found here but we’ve included a top line summary below.
Currently, people receiving means-tested benefits will receive a payment of £900, pensioners will receive £300 and those with disabilities will receive £150 additional financial support from the government.
These will be paid by the government directly into the bank account of the recipient and not via energy suppliers.
From Octopus Energy:
If you’re worried about paying your bills right now, head to our dedicated support blog.
You’ll find detailed information about our tariffs, background info on the energy crisis, and a link to our Financial Support form, which directs you to different ways we can help you if you’re struggling to pay – including a £30 million Financial Hardship fund.
What are the Flexible Octopus prices from January 1, 2024?
Your energy prices depend on where you live, and how you choose to pay. Below, we’ve included a breakdown of all Flexible Octopus rates and charges by region and payment method.
Flexible Octopus prices for customers who pay by Direct Debit. You can also click here to download these prices in a PDF.
Summary of the changes
- Every customer on Flexible Octopus will see slightly increased unit rates and no increase to their standing charge.
- If you’re already in debt on your account or your payments don’t look like they will cover your winter usage based on our forecast of what you will use, this could mean that our recommendation for your monthly payment goes up.
- Good to know: if you’re not paying by Direct Debit, you could save a further £80 on average by setting one up.
Why do prices vary based on location and payment method?
It costs us more to supply energy to some areas depending on things like proximity to generators, cost of maintaining local networks and more.
The same is true with different payment methods – for example, it costs suppliers more to administer and manage accounts that don’t pay by Direct Debit, so Ofgem factors that into their Price Cap.
Managing your direct debit amount
The best way to understand our suggested payment amount is to look at your Balance Forecast. We built this handy tool to show you exactly how much we expect you’ll spend on energy over the next year based on your tariff prices and typical energy consumption (which we work on based on years of your meter reading data).
What if I think Octopus’ payment suggestion is wrong? You can change your own payment online and via our app. If you try to set it so low that you’re at risk of falling into debt in the future, we just ask that you speak to us before you make the change.
Want a quick reminder of why we set your payments to a smooth amount year round? Watch our quick explainer video:
Frequently Asked Questions:
Does the energy price cap affect me?
×
If you’re on a variable tariff, like our Flexible Octopus, the Ofgem Price Cap protect the price you pay.
The price cap specifically applies to variable tariffs because they aren’t fixed against the volatility in the energy markets. Different suppliers can refer to these tariffs in a number of ways; standard variable tariff (SVT), non-fixed, etc. At Octopus our variable energy tariff is called Flexible Octopus.
If you’d like to confirm which tariff you’re on, and details like your current prices and contract dates, you can see them on your online account (scroll a little way down and look at the details below your property address).
You can read more about the energy price cap and whether it affects you on Ofgem’s website.
How could I get energy £80 cheaper by paying by Direct Debit?
×
Our Flexible tariff will have slightly different unit rates and standing charges based on your payment method. The £80 isn’t a flat discount for Direct Debit customers (or a charge on non-Direct Debit customers) – it’s the typical savings an average home could see over a year on the cheaper Direct Debit rates.
If you change how you pay, our system will pick that up and adjust your rates automatically, so if you don’t have a Direct Debit right now, it’s super easy to access the cheapest prices. All you need to do is set up a Direct Debit online and we’ll do the rest.
Why are tariffs sometimes cheaper if I pay by Direct Debit?
Not having a Direct Debit (and instead paying on receipt of your bill) costs us a lot more in admin.
We don’t think it’s fair to make everyone cover that extra cost, so we do offer a cheaper rate for those who choose to pay by Direct Debit, which costs us less to manage.
We run an incredibly efficient business, which means you’ll still get a great price if you choose to pay a different way – around £130 cheaper than the April Price Cap.
Is the £1,928 figure from Ofgem the maximum price I can pay for energy?
×
No: this figure is not the absolute maximum a customer could pay.
If you’re affected by the price cap, the protection you receive is relative to how much energy you use.
Ofgem calculates the price cap based on the yearly usage of a typical medium consumption home (that’s 2700 kWh of electricity and 11500 kWh gas per year). It represents the maximum amount Ofgem considers fair for energy suppliers to charge customers on variable tariffs.
This figure is used by suppliers to apply the price caps protection against each customer’s actual usage. Put simply: if you use more – or less – energy than that typical home, your own yearly energy costs on a tariff priced at the maximum rates may be higher – or lower – than that £1,928 figure from Ofgem.
What does a change in Typical Domestic Consumption mean.
×
Ofgem has recently reduced the ‘typical domestic consumption values’, in other words, how much they estimate an average household uses in energy per year. This is because households in the UK have reduced their energy usage over the past year and this has impacted the ‘average’ amount a household uses and therefore how much they pay on their energy bills. This means that the price cap looks like it has fallen more significantly as it takes into a account a fall in average energy usage as well as a fall in unit rate. You can read more here.
What are the actual maximum unit rates and standing charges of the energy price cap?
×
The price cap sets a maximum rate for:
- Energy units: the price suppliers can charge variable tariff customers per unit of gas and electricity you use
- Daily standing charges: the price suppliers can charge per day for ongoing costs, like paying the companies who manage distribution networks, operating costs, etc.
Ofgem have shared that on average – for customers paying by direct debit – the unit rates will be:
Electric:
- 28.62 p / kWh unit
- 53.35 p / day standing charge
Gas:
- 7.42 p / kWh unit
- 29.60 p / day standing charge
Important: these are averaged figures from across all regions in the UK. As certain costs vary, e.g. what transmission network fees we pay in an area, the actual maximum unit rate varies depending on region. There are other factors too: different maximum rates for Economy 7 tariffs (which have a day and a night price) and prepayment meters.
More information on other payment methods will be added to this page as it becomes available.
Why do high gas prices affect a 100% renewable energy tariff?
×
Though green energy is cheaper to generate, on the market it’s sold at the same, higher price of gas and other fossil fuels. That’s down to the way the market’s set up. It’s similar to how houses are sold based on the price of neighbouring homes, rather than what it costs to build.
It’s mainly set up this way because the grid always has to be balanced: the UK’s energy needs (or ‘demand’) matched perfectly with an equal amount of power supply. The grid calls on all different types of power, from gas to renewables, to help with its crucial balancing job.
It wouldn’t be entirely fair to pay some energy generators less for their power when they’re fulfilling the same important function. This means that the highest price ends up setting the market price. When gas prices are high, all electricity prices are too.
We’re pushing for a system in which more and more of the electrons are green ones – because the more green power in the grid, the less we need to rely on expensive, dirty gas imports to meet our energy needs at all.
I’m on a fixed tariff right now, what happens when it ends?
×
If you’re on a fixed tariff, the first thing to know is that the price cap doesn’t affect your current energy contract.
We’ll always email you in advance of your fixed tariff coming to an end.
If you’d like to confirm your current prices and contract dates, you can see them on your online account (scroll a little way down and look at the details below your property address) or on any PDF energy statement. It’s usually on the second page, near the top of the breakdown for your electricity and / or gas charges for the period.
