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Energy price cap cut by £122 a year as Tories pledge support for bill payers

Britain's Prime Minister Rishi Sunak
Rishi Sunak vows to put energy bills at the centre of the election campaign - Pool/Getty Images Europe

The energy price cap has been cut by more than £120 a year in a boost to millions of households as the Conservative Party pledges to offer additional support for bill payers.

Ofgem has today announced a 7pc decline in the price cap, taking the average annual direct debit bill to £1,568 from July – a reduction of £122.

It means energy charges are at the lowest level since Russia’s invasion of Ukraine in February 2022 caused global price spikes.

The announcement today came as Tories and Labour clashed on energy and how each would try to deliver cheaper household bills.

Labour leader Sir Keir Starmer is using a visit to Scotland to promote his plan for a publicly-owned green electricity generator, which he said would cut bills and boost energy security. Labour pointed out that bills were still £400 more than in 2021.

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Meanwhile, the Energy Secretary Claire Coutinho set out plans for consumer-friendly changes and accused Labour of not being “honest about the costs” that the switch to net zero power would involve.

However the latest fall in prices is largely driven by external factors after a decline in the global price of energy, especially gas, on international markets – with the UK importing over half its gas supplies.

The price of gas also affects the price for electricity because around 40pc of power is generated using gas-fired stations.

Around 18 million dual-fuel households pay by direct debit but for the five million on standard credit the price cap is set a little higher at £1,668, reflecting the extra costs incurred by companies.

The four million households paying by prepayment meter will pay a bit less at £1,522.

Standing charges remain unchanged at £334 for a dual-fuel customer and £369 for those who pay by standard credit.

The new cap will apply from July to September when Ofgem will adjust the price again according to global prices for energy.

Despite the fall, prices still remain well above those in April 2021, before the global energy crisis, when the price cap was just £1,138. Industry experts say there is little prospect that prices will fall back to that level for the foreseeable future.

Sir Keir will accuse the Government of “14 years of Tory chaos”, adding: “Families are picking up the tab of 14 years of Tory energy failure and are expected to remain a staggering £400 a year worse off under the new price cap.”

He will say: “Labour will stop families paying over the odds for energy. Great British Energy, our new publicly-owned energy company, will invest in homegrown clean energy to boost energy independence and cut bills for good.”

Ms Coutinho said Labour’s drive to decarbonise the electricity system by 2030 would “take us back to square one by making voters pay more for net zero”.

She said shifting away from North Sea oil and gas would put 200,000 jobs at risk.

The Energy Secretary set out her own energy policies, including maintaining the Ofgem cap throughout the next parliament to help keep bills down.

Under the Tory proposals, price comparison services will be made easier to use and Ofgem could publish league tables showing how long energy firms take to respond to customer complaints.

Ms Coutinho said: “Only the Conservatives have a clear plan for a secure future where we reach net zero without punishing families with extra costs.”

The price cap is a mechanism for limiting what suppliers can charge domestic consumers per unit of energy. It also limits the standing charge – the cost of maintaining the infrastructure and wiring needed to supply energy to homes.

Ofgem, the government regulator, which resets the cap each quarter, expresses the figure as the charge for an average household using both electricity and gas on a dual-fuel tariff and paying by direct debit.

The amount is based on a typical dual-fuel household in England, Scotland and Wales – the real amounts paid by consumers will vary depending on actual consumption.

Dame Clare Moriarty, chief executive of Citizens Advice, said: “Today’s news will give small comfort to households still facing cost-of-living pressures. The fall in the energy price cap reduces bills slightly, but our data tells us millions have fallen into the red or are unable to cover their essential costs every month.

“People cannot rely on lower energy prices alone to escape the financial issues they’ve been experiencing. That’s why we need better targeted energy bill support for those really struggling to keep the lights on or cook a hot meal.”

Dhara Vyas, deputy chief executive at Energy UK, the trade body for power suppliers, said: “Another fall in the price cap is good news …however, as Ofgem underlined earlier this week, it’s only a return to relative normality.

Customer debt is at record levels and likely to increase still further, so despite suppliers’ ongoing efforts to support households, the next government must work with the industry and Ofgem to put in place a long-term solution that provides targeted help for those who need it .”