Energy bills to fall as Ofgem trims price cap

23rd Feb 2024 09:28

(Sharecast News) - The cap on gas and electricity charges will fall from April, the energy regulator confirmed on Friday, cutting most household bills.

Ofgem said that from 1 April to 30 June, the price for a typical household using electricity and gas and paying by Direct Debit will go down to £1,690 per year.

That is a £238 reduction on the current cap, which runs from 1 January to 31 March.

It is also the lowest since March 2022, when average bills stood at £1,216 per year.

Russia's invasion of Ukraine in February 2022 sent wholesale energy prices soaring, and household bills rocketed in response.

The last year has seen wholesale prices ease notably. But while bills have fallen, they remain well above pre-pandemic levels. Households have also been rocked by surging inflation and the cost of living crisis.

Ofgem said energy debt had now reached a record £3.1bn.

In response, a one-off extra payment of £28 per year will be added to all bills, to cover the cost of dealing with that debt.

The regulator said the move would ensure suppliers have sufficient funds to support struggling customers.

Jonathan Brearley, chief executive of Ofgem, said: "This is good news to see the price cap drop to its lowest level in more than two years, but there are still big issues that we must tackle head on to ensure we build a system that's more resilient and fairer to customers.

"These steps highlight the limitations of the current system - we can only move costs around - so we welcome news that the government is opening the conversation on the future of price regulation."

The price cap sets a maximum rate per unit that can be charged to customers for their energy use, rather than the total bill. It means that households who use more energy on average will pay more than £1,690.

Households that pay by cash or cheque rather than Direct Debit will also pay more, to account for higher costs involved for energy providers.

The price cap was introduced in January 2019 to prevent providers over-charging customers on variable tariffs.