Advertisement
UK markets open in 23 minutes
  • NIKKEI 225

    40,003.60
    +263.20 (+0.66%)
     
  • HANG SENG

    16,540.84
    -196.26 (-1.17%)
     
  • CRUDE OIL

    82.65
    -0.07 (-0.08%)
     
  • GOLD FUTURES

    2,158.20
    -6.10 (-0.28%)
     
  • DOW

    38,790.43
    +75.63 (+0.20%)
     
  • Bitcoin GBP

    50,696.41
    -3,034.21 (-5.65%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • NASDAQ Composite

    16,103.45
    +130.25 (+0.82%)
     
  • UK FTSE All Share

    4,218.89
    -3.20 (-0.08%)
     

Ovo launches first energy deal below Government price cap as gas tumbles

Electrical pylons carry electricity cables across fields near Glastonbury, England - Matt Cardy/Getty Images
Electrical pylons carry electricity cables across fields near Glastonbury, England - Matt Cardy/Getty Images

One of Britain’s biggest energy providers has offered its first deal cheaper than the Government’s bill guarantee, as falling gas prices finally bring savings for customers.

Ovo Energy, which has 4.5 million customers, has launched a fixed 12-month tariff at £2,275.

The offer is £225 less than the Government’s Energy Price Guarantee (EPG), which caps the cost of a typical household’s annual energy bill at £2,500.

Providers are beginning to offer deals that below the EPG after sustained falls in the price of gas.

Wholesale gas prices have dropped by more than 80pc since their peak last August, though they are still roughly triple what they were before the energy crisis began. Natural gas is used to set the price of electricity, which is why it has pushed up all bills.

ADVERTISEMENT

Up until now, falling gas prices have brought no material fall in household bills because costs were still above the EPG, meaning only the Government benefited from falling prices.

However, experts expect average bills will soon fall below the EPG, unlocking savings for both families and the Government.

Energy analyst Martin Young, at Investec, this week predicted that a typical household will pay £1,981 a year from July under Ofgem’s energy price cap, meaning the Government will no longer be subsidising households.

Mr Young expected a further drop to £1,966 a year by October, which would be the lowest level since March 2022.

The forecasts have led to expectations that customers will once again be able to save money by switching, as providers start offering competitive deals again.

The EPG was introduced in October 2022 and limits the amount that suppliers can charge customers per unit of energy used.

It caps the annual bill for a typical British household at roughly £2,500, with the Government paying suppliers any costs above this level.

Chancellor Jeremy Hunt announced in his Spring Budget that the EPG would be maintained at £2,500 for another three months, before rising to £3,000 in July.

Falling gas prices over winter saved Mr Hunt an estimated £11bn, according to analysts at Cornwall Insight, which gave the Chancellor headroom to extend the bill support in the Budget.

By the end of June, the Government estimates that the EPG will have saved a typical British household £1,100.

However, despite the support, average household bills are still £285 more than 12 months earlier, according to the Energy and Climate Intelligence Unit.

More than seven million people are in fuel poverty, according to National Energy Action.

Ovo’s new deal is available to existing customers only. The company, which is Britain's third biggest energy supplier, said it wanted to give its customers the security of a long-term fix to protect themselves against ongoing energy price uncertainty.

The EPG is scheduled to end entirely in March 2024. After this point, there is no further planned Government support but consumers will still be protected by the energy price cap, which limits the amount suppliers can charge based on wholesale market prices.