Big change to energy bills could lower costs for millions of customers – but you’ll need a smart meter

A MEGA change to energy bills could cut the cost for millions of customers across the UK.

The change will see energy firms tally up customers’ bills every half an hour – but only if they have a smart meter.

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Energy regulator Ofgem is introducing rules that mean firms must settle consumer electricity bills for homes with a smart meter every half an hour from June 2025 onwards.

It announced it plans to introduce a new “dynamic” price cap based on the time of day households use their energy.

At the moment, the price energy firms pay for buying power from energy providers varies every 30 minutes.

But the cost for most customers does not vary so quickly, and is affected by giving meter readings.

In an energy context settling means an energy firm tallying up how much energy a customer has used versus the amount it cost.

Ofgem has launched a consultation on a range of options for the future of the price cap.

These include a “more dynamic cap” with “time-of-use dependent unit rates to encourage consumer flexibility”.

It means customers could be rewarded for using energy at low-use times of the day.

Ofgem said the increasingly renewables-dominated electricity sector would reward consumers for shifting the time of their energy consumption.

This would in turn reduce costs for everyone.

As more households adopt time-of-use tariffs, it could become harder to retain a universal price cap that was suitable for everyone.

The introduction of half-hourly settlement when smart meters will record energy consumed every 30 minutes is expected to come into force in 2025.

This means prices could be cheaper when renewable generation increases, such as when the weather is windy or sunny.

Other options include a targeted cap which could be based on a variety of factors such as vulnerability, and more flexible, market-based price protections.

We recognise the systems we have in place may need to change too

Tim JarvisOfgem’s director general

This could mean putting a limit on a supplier’s default tariff and tariffs available in the market.

This would cap the margin suppliers are able to make, or replace the cap with a ban on acquisition-only tariffs.

Aquisition-only tariffs are when only new customers are offered the best deals.

Ofgem said the price cap, along with the temporary ban on acquisition-only tariffs, had worked well to protect existing customers from the “loyalty penalty”.

This is where loyal customers on default tariffs pay higher prices then new customers.

It said energy retail markets were changing as increasing numbers of consumers changed their energy consumption and begin using electric vehicles, heat pumps and solar panels.

Tim Jarvis, Ofgem’s director general of retail and markets, said: “While the price cap played an important role in protecting consumers from the loyalty penalty that existed before its introduction, the energy market is changing as we move to net zero.

“And we recognise the systems we have in place may need to change too.

“We’re looking in detail at the elements of the price cap that have worked well and the challenges we’ve identified in recent years, while also considering how a wide range of future consumers will use and pay for energy to make sure we develop the right measures that will protect and benefit consumers across the board.

“We will continue to work with government, industry, consumer groups, charities and the public on the future of pricing regulation. Our aim is ensure the market works for everyone.”

This post first appeared on thesun.co.uk