What we pay per unit of energy is falling, but daily charges are rising and will soon add more than £300 a year to the average bill for the first time.
Most households will see a welcome drop in energy prices, with Ofgem’s limit dropping from £2,074 to £1,923 a year for the average household from 1 October.
Ofgem’s price cap limits how much they can charge you for the gas and electricity you use, if you are on a variable tariff and pay by direct debit.
The drop on October 1 is because unit rates (how much you can be charged for each unit of gas and electricity you use) will be cheaper.
Not standing still: permanent charges have been steadily increasing since 2021
But while the price we pay for the gas and electricity we use may be falling, the price we pay for daily charges is actually rising, and will rise further.
Currently, the average electricity unit rate is 30.11 pence per kilowatt hour (kWh), which will fall 9 per cent to 27.35 pence per kWh on 1 October.
For gas, the typical unit rate is currently 7.51 pence per kWh, falling 8.2 per cent to 6.89 pence per kWh since October.
Meanwhile, the usual electricity charge is 53p a day and will not change on 1 October. For petrol, the typical standing charge will increase from 1p to 30p.
These may seem like small increases, but permanent charges have more than doubled in two years and are expected to continue to rise.
From October 1, a typical household will pay £193.45 for electricity a year and £109.50 for gas, bringing the total to over £300 for the first time.
What are permanent positions?
Permanent charges pay the cost of powering your home.
Unit rates pay for the gas and electricity you use, and ongoing charges pay for everything else.
This includes things like customer service, sending engineers to properties and maintaining power lines, for example, as well as unpaid energy bills.
Just two years ago, in the summer of 2021, the usual charge for electricity was £91.25 and £98.55 for gas.
This rapid increase in fixed rates has drawn fierce criticism from consumer advocates, not least because they cannot be avoided by simply cutting energy use, as is the case with unit rates.
Simon Francis, convener of the Coalition to End Fuel Poverty, said: “From 1 October, every household in every part of the country will pay more for ongoing energy costs, more for the profits of energy companies. and many are more indebted to their suppliers.
‘Average energy bills are still almost double what they were three years ago and government help to households, which was available last winter, has been removed. “This means this winter will be worse for many homes.”
Permanent charges are rising due to rising costs for energy companies, including the cost of covering bankrupt energy companies, and large increases in the cost of fixing electrical infrastructure, such as power lines.
An Ofgem spokesperson said: ‘The standing charge is covered by the price cap, which sets a limit on the total amount that can be charged to households.
‘Suppliers have always been free to structure their fees as they see fit and we know that some suppliers do not have a standing charge.
‘However, we continue to examine the issue and how costs are passed on to customers.
“It remains a complex issue, and a recent impact study shows that shifting costs from the standing charge to a higher unit rate would result in winners and losers, and could be particularly detrimental to the most vulnerable consumers.”
Breakdown: The electricity standing charge pays for things like customer service and the cost of running the electricity grid and operating the meters.
What is the future of permanent positions?
Regulator Ofgem does not make predictions about the future of energy bills.
However, experts at analysts Cornwall Insight believe fixed electricity rates could reach 60p a day next summer, and fixed gas rates could reach 30p.
The amount you pay will vary
Permanent charges vary depending on several factors, including where you live and the type of meter you have.
For example, houses in Liverpool have the highest overhead charges, with a combined total of £362 a year.
Meanwhile, London households pay the lowest, averaging £276 for gas and electricity.
Households with a smart meter pay less than those with prepaid or standard energy meters.
It is even possible to get an energy tariff without any ongoing charges, although these tend to be as expensive as standard deals as the unit rates will be higher.
What is the future of energy bills?
Ofgem makes no predictions about how the price cap will change in the future, although chief executive Jonathan Brearley has previously warned customers that “I can’t offer any certainty that things will improve this winter”.
However, Cornwall Insight makes energy bill price predictions that are usually very accurate.
Cornwall Insight believes the typical household will pay £2,032 from January 1, dropping to £1,964 in April, £1,917 in July and then rising again to £1,974 next October.
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