With just days left of the ‘observation period’ and a week before Ofgem formally announce, we can already predict what to expect from the upcoming Price Cap, effective 1st October 2024.
Later this month Ofgem will confirm the final number, but as it stands it is likely to head back towards, and slightly above, the levels seen in April of this year.
Whilst the wholesale market moves each day, and more aggressively upwards in recent weeks, this is the main influence of the cap calculation with the other elements holding relatively flat.
As of now, we expect the price cap to outturn at around £1,715 as a headline rate – that being a ‘typical customer’ who uses both gas and electricity at expected levels and pays by direct debit.
The increase in the cost compared to the July 2024 cap is a mix of wholesale and non-wholesale costs. In April and October each year, the non-commodity costs are reviewed – so in January and July they don’t really move and it’s just wholesale movements that effect the cap price.
For October, wholesale costs account for around £100 of upward movement, whilst around £40 is attributable to non-wholesale costs – and then of course 5% VAT is applied to add a further £7.
That will all add up to around £147 on top of the current £1,568 to bring us to the £1,715 expectation as things stand*.
But what does this mean to an actual consumer? Well the headline rate, as we’ve said for many years, means nothing to anyone other than to give some context as to cost direction.
Consumers should focus on the unit costs per unit of energy – the standing charge and unit rate.
Standing charges will increase again, much to the annoyance of many, by around 0.4p/day for gas and 1.2p/day for electricity.
Unit rates are expected to increase by around 0.8p/kwh for gas and 1.8p/kwh for electricity.
That should see standing charges increase from 31.46 pence per day for gas and 60.14 pence per day for electricity to 31.82 pence per day for gas and 61.33 pence per day for electricity.
For the unit rates, we expect them to increase from 5.48p/kwh for gas and 22.36p/kwh for electricity to 6.27p/kwh for gas and 24.23p/kwh for electricity.
Whilst there is still time for these numbers to change with such a volatile wholesale market, we expect them to be relatively close to the final outturn.
As we move into the winter months, the market is in a difficult place once again – and potentially navigating unchartered waters once again. Fundamentally secure with things like gas storage at impressive levels but underpinned by a very uncertain geopolitical landscape which can easily impact our global energy markets at a moments notice.
* Forecasts taken based on market close of 12th August 2024.