With the recent announcement by Ofgem that the Energy Price Cap level will be reduced from July 1 due to lower gas and electricity prices, you might find drivers asking if the bills to charge their EVs are going to drop.
Well, yes and no, is the answer. Here’s why.
What are the changes to the Energy Price Cap level?
Ofgem has announced that for the average consumption dual fuel household paying by direct debit, the Energy Price Cap will be set at an annual level of £2,074 from July 1. At its peak, the EPC reached £4,279.
The July EPC is the equivalent of 30p per kWh for electricity customers and a standing charge of 53p per day, on average.
While prices are falling, they’re not yet at the levels seen before the energy crisis. Ofgem CEO Jonathan Brearley said: “In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis”
What’s the difference between the Energy Price Guarantee and the Energy Price Cap?
The Energy Price Guarantee was introduced in October 2022 as an extra measure to ensure households were protected to some extent from fast rising prices during the energy crisis.
The EPG is set to rise to an average of £3,000 a year in July, having originally been set at £2,500.
It differs from the Energy Price Cap (EPC) in that it is a temporary mechanism intended to limit the unit price for an average household. The Energy Price Cap, which has been in place since 2019, ensures that suppliers can’t overcharge customers for their gas and electricity.
Households always pay based on whichever is lower, and from July, this will be the Energy Price Cap, not the Energy Price Guarantee.
Does the Energy Price Cap ensure you pay less for EV charging?
In one sense, the EPC does ensure EVs cost less to charge, in that it limits the unit cost of domestic electricity.
But it doesn’t set a limit on the overall cost of electricity. So the cap is a cap in one way, but not the other.
Possible confusion comes from the way the cap is talked about, in that it is referred to as the overall cost for the average usage of domestic electric, which from July will be £2,074 for a typical household.
However, the crucial word here is ‘typical’. Of course, a driver charging their EV at home regularly is unlikely to be an average consumer of domestic electricity. Ofgem bases its calculations on 2,900kWh a year, and to charge an EV at home for 12,000 miles annually, averaging 3 miles per kilowatt hour, would require 4,000kWh a year. Clearly that user would far exceed Ofgem’s average model.
Do the EPC or EPG limit public charging costs too?
No. Both measures are used only for domestic charging and so businesses are still subject to the market fluctuations in energy costs. In some cases they will still be on fixed tariffs or will have hedged energy, so have reduced exposure, but generally public charging networks are affected by price rises.
In their unit costs for electricity, they are also having to factor in other economic headwinds that have been increasing the costs of doing business, such as inflation and interest rate rises.
That’s why the unit cost of charging public has been rising, while domestic charging has stayed level.
So will EV drivers see lower bills?
Yes, they will. The unit cost for electricity is coming down. At the start of 2023, the Energy Price Guarantee limited the unit costs of electricity to 33p, but now the cap has dropped below it to 30p.
That means bills for EVs charged at home will start to drop a bit: the cost to charge a 60kWh battery would fall from £19.80 to £18, for example.
The current general price trend is a positive one, but it remains to be seen if prices drop further still over the summer months.
With Allstar Homecharge, you can keep a close eye on the cost of charging your fleet at home, and pay for it simply, too. Watch our video here on how it works.
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