Exact amount your energy direct debit will drop by from July – and some households will save more than others

MILLIONS of households will see their energy bills drop this summer.

It comes after the energy regulator announced that typical gas and electricity bills will be capped at £2,074 a year from July 1.

The fall in Ofgem’s price cap will reward households battling the cost of living with a £426 annual saving.

This will take effect when the government’s Energy Price Guarantee, which limits the typical domestic energy bill to £2,500, expires in a month’s time.

It marks the first time consumers on default tariffs have seen prices fall since the global gas crisis took hold more than 18 months ago.

The energy price cap works by setting a limit on the maximum amount suppliers can charge for each unit of gas and electricity.

It’s not a cap on how much you can be charged for the energy that you use – so if you use more expect to pay more.

However, we’ve crunched the number to establish how much certain households will save when bills fall in July.

We’ve worked out how much a typical small, medium and large household currently pays via direct debit each month and how much they’ll pay when the price cap is reintroduced in the summer.

But don’t expect to be charged the exact figures we’ve crunched.

These are based on national averages and it’s important to remember that the price cap is only a limit on what suppliers can charge – not how much your bills will be.

If you use more energy, expect to pay more. And if you use less, your account may be in credit and your direct debits may be reduced to reflect this.

Your monthly direct debit may also vary depending on if you’re in debt or have significant credit with your energy supplier.

A small household made up of one to two people uses around 8000kWh of gas and 1,800kWh of electricity every year.

Right now, these households pay roughly £144 a month on their energy bills.

But the same household could see their bills drop to £123 a month from July 1 – which represents a £21 a month saving.

A medium household is made up of two to three people and uses an average of 12,000kWh of gas and 2,900kWh of electricity every year.

The average monthly bill for these households under the government’s cap sits at £208 a month.

But the same household could see their bills drop to £177 a month from July 1 – which represents a £31 a month saving.

That leaves larger households often made up of four to five individuals that use roughly 17,000kWh of gas and 4,300kWh of electricity every year.

Right now monthly bills for these homes average £290.

But the same household could see their bills drop to £246 a month from July 1 – which represents a £44 a month saving.

How are gas and electricity rates changing and how can I calculate my bill?

Right now, a typical household that pays their energy bill by direct debit pays the following rates:

• 10.31p per kilowatt hour (p/kWh) for gas
• 33.21p/kWh for electricity
• A standing charge of 29.11p per day for gas
• A standing charge of 52.97p per day for electricity

But from July 1, Ofgem will introduce the following new rates:

• 8p per kilowatt hour (p/kWh) for gas
• 30p/kWh for electricity
• A standing charge of 29p per day for gas
• A standing charge of 53p per day for electricity

To calculate how much you will pay from July 1, you will need to find out both your unit rate for gas and electricity and the standing charge for each fuel type.

The unit rate will usually be shown on your bill in p/kWh.

The standing charge is a daily charge that is paid 365 days of the year – irrespective of whether or not you use any gas or electricity.

You will then need to note down your own annual energy usage from a previous bill.

Once you have these details you can work out your gas and electricity costs separately.

Multiply your usage in kWh by the unit rate cost in p/kWh for the corresponding fuel type – this will give you your usage costs.

You’ll then need to multiply each standing charge by 365 and add this figure to the totals for your usage – this will then give you your annual costs.

Divide this figure by 12 and you’ll be able to work out how much you should expect to pay each month from July 1.

It’s important to note that households who don’t pay by direct debit and instead pay on receipt of their bill will spend slightly more.

This is because there’s a separate unit rate and standing charge cap for this payment method.

But prepayment meter customers, who top up a meter to get their gas and electricity, will be charged the same rates as direct debit payers.

Ofgem used to set the price cap every six months. But since August last year, it now reviews the limit every three months.

This means that annual energy bills may drop further into 2023 when the next price cap comes into force in October.

If you think your bill isn’t reflecting the lower rates from July, you can challenge it with your energy supplier.

How do I challenge my energy bill?

If you pay your energy bill by direct debit, then it is assumed that this monthly amount should be “fair and reasonable”.

If you don’t think it is, you should complain directly to your supplier in the first instance.

If you’re not happy with the outcome you can take it to the independent Energy Ombudsman to dispute, but there are a few steps before you get to that stage.

Your supplier must clearly explain why it’s chosen that amount for your direct debit.

If you’ve got credit on your account, you have every right to get it back – although some experts recommend keeping it there through the summer, so your bills don’t go up in the winter when you use more energy.

Your supplier must refund you or explain exactly why not otherwise and the regulator, Ofgem, can fine suppliers if they don’t.

If you are disputing a bill, taking a meter reading is a must.

If it’s lower than your estimate, you can ask your provider to lower your monthly direct debit to a more suitable amount.

But beware so you don’t end up in debt later on with a bigger catch-up bill at the end of the year from underpayments racking up.

If you don’t have success in negotiating a lower payment then you can put in a complaint to the Energy Ombudsman.