Household energy bills in the UK will fall from July after the energy regulator lowers its price cap from the current £3,280 per year to £2,074.
Ofgem said the £1,206 reduction to the cap—which will come into effect on July 1—reflects recent falls in wholesale energy prices.
The price cap has rocketed from £1,162 a year for a typical household in August 2021 to its current level, having briefly reached £4,279, with the COVID-19 pandemic and Russian President Vladimir Putin’s invasion of Ukraine both pushing up wholesale prices.
The lower cap will replace the government’s Energy Price Guarantee (EPG), which currently limits the typical household energy bill to around £2,500.
It means the average household will see their annual bill drop by £426.
The cut to the cap marks the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago, Ofgem said.
‘Welcome Step’
Ofgem chief executive Jonathan Brearley said: “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction. People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.
“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups, and the wider industry work together to support vulnerable groups. In particular, we will continue to work with government to look at all options.”
Energy Security Secretary Grant Shapps said: “It’s positive households across the country will see their energy bills fall by around £430 on average from July, marking a major milestone in our determined efforts to halve inflation.
“We’ve spent billions to protect families when prices rose over the winter, covering nearly half a typical household’s energy bill—and we’re now seeing costs fall even further with wholesale energy prices down by over two-thirds since their peak as we’ve neutralised Putin’s blackmail.
‘Cold Comfort
But experts have warned that consumers will not see much of a difference in their bills despite the lower price cap.Martin Lewis, founder of MoneySavingExpert, said: “This will be a relief for many, yet most will still be paying more for their energy than during the winter.
“This is because, apart from for those with high use, the drop in the rates doesn’t make up for the £66 per month state support people got until April—and most are on monthly direct debit, which means they pay the same in summer as winter.
“Overall, this still leaves people paying double or more what they did before the energy crisis hit in October 2021.”
Opposition parties have blamed the Conservative government for failing to lower energy prices further for consumers.
In a statement, Labour’s shadow climate change secretary Ed Miliband said: “This is the result of 13 years of Tory energy policy failure, blocking onshore wind, closing our gas storage, and stalling on energy efficiency, which has left our country insecure and vulnerable to high gas prices.”
Liberal Democrat Leader Sir Ed Davey said the new price cap is “cold comfort” for households under cost-of-living pressures.
In a statement, he said: “The Conservative government could have chosen to cut energy bills months ago funded through a proper windfall tax. Instead, Rishi Sunak put bills up while families suffer. It shows he doesn’t get it or just doesn’t care.”
