Energy bills down after the regulator cuts the ceiling

Featured Sponsor

Store	Link	Sample Product
UK Artful Impressions	Premiere Etsy Store

Energy regulator Ofgem has cut the cap on UK domestic energy bills by £1,206 following a drop in wholesale gas and electricity prices.

The price cap will drop to £2,074 a year from July for typical households, down from £3,280 over the past three months.

The cap regulates the maximum energy suppliers can charge customers on default rates, although the government has footed part of the bill for households since October.

The drop in the level of the cap means government support will now fall, while typical households will pay around £426 less a year.

However, bills under the roof will still be about 60% higher than before the surge in energy prices that began in late 2021 – in the run-up to the Russian invasion of Ukraine – helped push the ‘high Inflation in the UK and triggered the cost-of-living crisis.

Jonathan Brearley, managing director of Ofgemthe energy regulator, said: “People should start seeing cheaper energy bills from the beginning of July, and this is a welcome step towards cutting costs.

“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will continue to worry many people up and down the country.”

Introduced in 2018, the price cap sets a limit on the amount that suppliers can charge households for each unit of electricity and gas.

The £2,074 level reflects estimates for typical households below the limit, but actual bills will vary depending on usage.

The new unit limits are 30p for every kilowatt-hour of electricity and 8p for every kilowatt-hour of gas, up from the previous 51p for every kilowatt-hour of electricity and 13p for every kilowatt-hour of gas.

Fixed charges remain the same at 53p per day for electricity and 29p per day for gas.

The price limit is reset every three months to reflect changes in wholesale costs. It started to rise in April 2022 following a hike in wholesale gas and electricity prices linked to the Russian invasion of Ukraine.

It reached £3,549 in October and then £4,279 in January, compared to less than £1,280 in previous years.

The government has stepped in to protect households and limit typical bills to £2,500, paying suppliers the difference between this rate and the maximum price.

Estimates indicate that the price guarantee, which runs until next March, will cost the state £29.4bn.

Wholesale energy prices fell as a result of a relatively mild winter and efforts to save energy in Europe but remain above historical norms.

Energy UK, a trade group representing energy retailers, warned that a price cap above £2,000 would become the “new normal”.

He said the industry now needs to work with the government on targeted support for customers next winter.

“We must also move forward with expanding our sources of clean home energy and making our homes more energy efficient,” said Energy UK, “as this will help reduce energy costs permanently for all clients”.