Ofgem confirms energy price cap to drop – but bills still expected to rise by extra £500 | Personal Finance | Finance

Energy regulator Ofgem has announced the price cap will drop to £3,280 for a dual fuel household paying by direct debit based on typical consumption from April 1, down from £4,279. However, energy bills for typical UK households will be held at £3,000 for 12 months from April under the Government’s energy price guarantee.

The guarantee is currently at £2,500 for typical households, meaning a rise of £500 come April.

The country’s regulator limits the maximum amount supplies can charge households for each unit of energy that is used.

This limit, known as the energy price cap, is applied to all households living in England, Scotland and Wales.

As it stands, Ofgem’s energy price cap is sitting at £4,279 but this has been capped at £2,500 thanks to the Government’s price guarantee.

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After the introduction of this support scheme, the average energy bill for households of average usage only rose by 27 percent in comparison to much higher predictions.

Under the energy price guarantee, the average price of a unit of gas and electricity is capped which means the households on average usage will pay £2,500.

It should be noted that families with above-average usage will have to pay more towards their energy bills and are not protected under the price guarantee.

When first announced, the Government previously said the energy price guarantee would last for two years.

Chancellor Jeremy Hunt previously confirmed the current energy price guarantee would be increased to £3,000 for typical households in April 2023, which will be a £500 hike in gas and electricity bills for many households.

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Ofgem CEO Jonathan Brearley said today’s announcement “reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began”.

He added: “While it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease.

“If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”

Mr Brearley warned prices are unlikely to fall back to the level seen before the energy crisis.

He continued: “Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain.

“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to.

“We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”

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On today’s news, Richard Neudegg, the director of regulation at Uswitch.com, said: “This significant fall in the Ofgem price cap should mark a turning point for the energy market, and could be the last quarter in which the cap is priced above the current energy price guarantee level.

“Yet, with the energy price guarantee still set to rise by 20 percent to £3,000 a year for average consumption and the end of the £400 Energy Bills Support Scheme, households will be facing higher bills from April.

“Now is the time for fixed deals to return to the market to get the benefits of falling wholesale prices to consumers as soon as possible. After 18 months of sky-high energy bills, households need stability as well as choice in who their energy provider is and what they pay.

“A return to fixed deals will bring the benefits of competition back to the market, giving consumers the chance to vote with their feet and choose a supplier with the best deal and customer service, as well as locking in more price certainty.”

Express.co.uk readers have shared their reaction about the news, with “werfd52” commenting: “Ofgem are supposed to work on behalf of the consumer, this is obviously not happening. How can they still be allowing the Energy Companies to get away with ripping of customers and making millions of profit.”

“Upherds” wrote: “Every extra £ on energy bills is a £ less going to shops and restaurants etc, I think we’ve only seen the tip of the iceberg with pubs shops and restaurants closing down.”

Emlj penned: “So yet again the only ones benefitting are those in big houses who have more money than most. The average Joe’s bill isn’t that high. So more profits for the energy companies. This is a scandal, the government should hang their heads in shame for what they are allowing.”