Yahoo Finance Ofgem: Millions of Brits set for lower bills as price cap drops by seven per cent
Millions of Brits are set to pay lower bills from July after Ofgem announced it would lower its price cap by seven per cent in response to falling wholesale prices.
The regulator announced it is dropping its price cap from the current £1,690 for a typical household in England, Scotland and Wales to £1,568, a drop of £122 over the course of a year.
The fall is around £500 less than the cap in July last year, when it was £2,074.
That means that for every £100 you pay now, you’ll pay £93 from July until September.
“Today’s news will give small comfort to households still facing cost-of-living pressures,” said Citizens Advice chief executive Dame Clare Moriarty.
“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.”
Mike Thornton, chief executive of the Energy Saving Trust, also warned the announcement wasn’t “a sign of stability.
He said: “Forecasts show that energy prices are set to rise again this autumn and will be staying high overall for the next decade.
“After the election the incoming UK government must prioritise policies that support people to use less energy and install cost-effective energy efficiency improvements in their homes.
“This will be fundamental to bringing down energy bills, reducing carbon emissions and guaranteeing our energy security for the long term.”
Steve Vaid, chief executive of the Money Advice Trust, the charity that runs National Debtline, added: “The modest fall in the energy price cap will provide some relief to households, yet energy arrears remain at record levels. Millions of people will remain trapped in energy debt without further support.
“Urgent action is needed to help struggling households.
“Tackling mounting energy arrears should be a priority for the next Government, through a Help to Repay Scheme to ensure people have access to a safe route out of energy debt.”
Ofgem tweaks the price cap every three months based on several factors, the most important of which is the price of energy on wholesale markets.
The latest fall will add further relief to households after the previous quarter-on-quarter drop in April, but analysts have said they expect Ofgem to increase the price cap by 12 per cent in October, before dropping it again in January 2025.
The price cap does not limit a household’s total bills, people still pay for each unit of gas and electricity they use – the figures provided are just for an average-use household.
On Wednesday, Ofgem chief executive Jonathan Brearley told the Energy Security and Net Zero Committee that prices “are still significantly higher than they were before, and when we look further out our best estimate is that prices are going to stay high and volatile over time”.
Simon Virley, head of energy and natural resources at accountancy firm KPMG, added: “We should remember that the price cap was only ever supposed to be a temporary measure, while the retail energy market was reformed.
“Since its introduction five years ago, we have seen dozens of suppliers exiting the market and switching levels plummet.
“We need to get the balance right between protecting those consumers who need support and providing adequate incentives for companies to innovate and invest in energy retail.”
Since the announcement, share prices across the UK’s biggest energy firms have fallen.
Centrica, which owns British Gas, saw value drop by 1.2 per cent, as did E.ON.
Additional reporting by Josie Clarke – Press Association
