Could revised average energy consumption mean the price cap increases by less than 13%?
While analysts estimate that the price cap will go up by about 13% in July, the headline figure could actually be much lower depending on the results of an Ofgem consultation.
Ofgem has been consulting on reducing its Total Domestic Consumption Values (TDCVs) - which it uses to define average annual household energy consumption - for the first time since 2023 in order to reflect a drop in average energy usage.
The regulator says that it could begin using revised TDCVs starting with the July price cap, which would mean that the headline increase to the price cap would look lower because the figure would be calculated using lower annual consumption figures.
The current TDCVs and Ofgem's proposed revised TDCVs are below.
| Typical energy usage (property type and size) | Average annual electricity consumption 2023 | Average annual electricity consumption 2026 | Average annual gas consumption 2023 | Average annual gas consumption 2026 |
|---|---|---|---|---|
| Low (flat or 1-bedroom house/1-2 people) | 1,800 kWh | 1,600 kWh | 7,500 kWh | 6,000 kWh |
| Medium (3-bedroom house/2-3 people) | 2,700 kWh | 2,500 kWh | 11,500 kWh | 9,500 kWh |
| High (5-bedroom house/4-5 people) | 4,100 kWh | 3,800 kWh | 17,000 kWh | 14,000 kWh |
Does this mean the predicted price cap would be lower?
Remember that the reported price cap figure (e.g. the current figure of £1,641) is just an illustrative example to show what an "average use" home spends annually on its energy. If Ofgem uses a lower consumption figure, then it will look like the price cap hasn't risen by the expected 13%, because the average usage figure will be lower. But this isn't the case - the price cap rates are likely to still go up by the expected amount.
If Ofgem uses the current TDCVs, the illustrative example price cap figure would be around the level currently predicted of around £1,850. But if Ofgem uses the revised TDCVs, it will be using an illustrative example that represents a household using less energy, which would be more around the level of £1,660.
The price cap doesn’t represent a cap on a total bill - only on unit rates and standing charges. So if you use more than the average consumption, you’ll pay more - if you use less, you’ll pay less.
What does this mean for customers?
These revised TDCVs haven't been confirmed yet, and there's no guarantee that they'll be in place for the July price cap. Additionally, while they might be revised, they might not be revised to the same level as Ofgem has proposed.
It's important not to be lulled into a false sense of security if it looks like the price cap won't increase as much as it's currently predicted to. Whatever the price cap is set at, it doesn’t represent a cap on a total bill - only on unit rates and standing charges. So if you use more than the average consumption, you’ll pay more than the average figure - if you use less, you’ll pay less.
If you’re on a standard variable energy tariff, the cost of your unit rates and standing charges is still likely to increase from 1 July. You can take action to avoid that by fixing your deal, which will also protect you from high prices for the rest of the year and beyond.
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