We all hear about the average house and the effect on the price cap, but what will it mean in practice?  

The UK Government has unveiled a significant emergency support plan at it works to shield households and businesses from soaring energy bills.  

Essentially this sees government intervention ‘cap the cap’ at £2,500 for domestic customers from 1 October, instead of the average £3,549 Ofgem had set previously.  

The calculation of the price cap is complex and relies on a predicated forward purchasing plan, as such it does not actually reflect the current market prices, but a longer term average of previous prices.  

The revised price cap to take effect from 1 October will be 10.03p/kWh (pence per kilowatt hour) for gas, with a standing charge of 28.5p per day. For electricity, it's 34.0/kWh, with a standing charge of 46.4p per day. This is a rise of 25 per cent from the current price for electricity and 43 per cent increase for gas. The current market prices are roughly 28p/kWh for gas and 78p/kWh for electricity, significantly higher than today’s standing charge, and so Government intervention will be welcomed by many.    

The question that I am often being asked is what is ‘the average house’ and what is the variation? It is set by Ofgem and it has a low, medium and high average domestic consumption which roughly translates as a one-bedroom apartment, a three-bedroom semi-detached house and a larger detached property. Obviously there will be a variation with age of property, with the most efficient houses on average costing half to heat compared with the least efficient properties. The average gas consumption for the average three-bedroom house is 12,000kWh, and this ranges from around 7,000kWh for more efficient properties to 14,000kWh for the less efficient ones.¹ 

The variation in the October price cap for the average house is therefore circa £2,000 for an efficient property to £2.700 for a less efficient one, with the average being £2.500 per annum. With the Energy Bills Support Scheme’s £400 payment also being made to make it effectively £2,100 per annum. This will reduce the costs for a one-bedroom apartment to £1,700 per annum and a larger detached property to £3,500 on average (before the £400 payment is taken into account). In terms of budgets, the average December monthly bill is likely to be almost £300 for gas and electricity. 

We welcome the news that the Government will be looking to use the same rates for commercial property (new electricity 0.35p/kWhnew and gas  0.10p/kWh) for six months. However, it is crucial that these rates are applied to existing contracts secured since the beginning of the war in Ukraine, for businesses that have already secured deals in a challenging rising market.

¹Source: NEED, EPC

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Contact David Thomas

How to keep commercial energy costs down amidst a tenfold increase in wholesale pricing