Can anyone explain how the energy cap works?

[LuluBlakey1]

We have gas and electricity accounts with British Gas.

How do they apply the £400 payment from the government - do they take £200 off each account? Or ask us or what?

How do they apply the £2500 cap? Against one account, divided equally across both?

Our estimates from them do not add up to £2500 (although they might given the costs from 1 Oct but our new bills that arrived today don't state that amount as estimates)

We currently pay £60 a month electricity Direct Debit and £175.00 a month Gas Direct Debit which way more that covers the amounts we use. I don't object to the Gas as we will use much more over winter. However they have just increased our electricity Direct Debit from £60 a month to £145.00 a month and at the same time are telling us our annual useage estimate cost is £617.00 a year (they have not included the £400 government payment in either bill) That direct debit is £145x12 = £1740 a year. We are not in debt to them. Can I insist the electricity Direct Debit is reduced to £80.00 per month (given the £400 payment from the government is also to be taken into account?)

Yes, they have reduced the increase, i.e. there is still an increase but it's not as big an increase as it would have been without intervention. I wonder if people have heard the word 'reduction' and think their bills will actually go down.

The idea of a price cap expressed as an actual monetary amount has to go down in history as one of the worst piece of public information comms. It needs to be retired as soon as possible as it really isn't clear how many people have seen lazy headlines and think the means they can have the tumble drier running 24*7. No-one describes petrol prices as an annual amount for a 'typical' driver, you just say it was [x]p per litre and now it's [y]p per litre. Okay, energy is a bit more complicate as there are two fuels and two standing charges, but one headline figure would then allow people to get the basic gist before getting all the detail. Even just the percentage increase in electricity unit cost would do a better job.

You should have details from your supplier re the £400 credit.

The energy cap is based on what OfGem say is the maximum energy suppliers can charge customers. At present is about 1.9% above the price they buy the energy for so they can make 1.9% profit. As the price rises the value of the cap also has to rise. They have to allow the companies to make a profit or companies may go bust as we seen earlier this year. If the companies go bust it costs money to move consumers to new suppliers and the cost for suppliers rise as they have to buy more energy (supply and demand like summer holiday prices).

Looking at your electricity bill the reason for the increase in DD is you were on BGs Price Promise Fixed Tariff until 30 September 22. The rate was below the Ofgem increase on 1 October 2021. Your price was fixed below Ofgems rate therefore the increase in DD is taking into account the increase in electricity prices in the past 12 months which others on variable rates had to pay.