Starting from Saturday, households in the UK will witness a decrease in their gas and electricity bills, although warnings persist that these bills will remain nearly double the pre-energy crisis levels.
As a result of plummeting wholesale prices, Ofgem has lowered its price cap, leading to an average annual reduction of £426 per household from July 1. Prior to this adjustment, the energy regulator had set the price cap at £3,280, but it has now been revised to £2,074, providing some respite to consumers who have experienced a surge in bills since October 2021 due to the global gas crisis.
During this period, the government’s Energy Price Guarantee (EPG) had partially shielded households from the full impact of rising prices by capping annual energy costs at £2,500 for the average household, effectively subsidizing Ofgem’s price cap.
With Ofgem’s recent revision, the price cap will once again govern household bills, resulting in a 17% decrease from £2,500 to £2,074, offering a measure of relief.
The energy price cap serves as a limit on the maximum charges suppliers can impose for gas and electricity usage. However, it’s important to note that the headline figure represents an average across households, and actual bills will vary depending on individual usage.
Despite these positive developments, Adam Scorer, CEO of the charity National Energy Action, highlighted that many households continue to face challenges. He noted that as of tomorrow, two-thirds of households in the UK will no longer receive assistance to mitigate the impacts of the energy crisis, and Ofgem’s price cap will provide limited protection for these households.
Forecasts from energy industry consultancy Cornwall Insight suggest that household energy bills are expected to decrease further, falling below £2,000 per year from October. Specifically, Cornwall Insight projects that the energy bill price cap will decrease to £1,978.33 from July’s £2,074. However, from January, it is anticipated to rise slightly to £2,004.40, based on Ofgem’s current measures.
It’s worth noting that Ofgem will be adjusting its definition of average household energy consumption from October. This adjustment reflects the fact that consumers are using less energy to mitigate costs in the face of high prices. The revised average usage will decrease from 2,900 kWh per year to 2,700 kWh for electricity and from 12,000 kWh to 11,500 kWh for gas.
Taking into account Ofgem’s adjusted definitions, Cornwall Insight predicts that price caps of £1,871 per year will be announced from October, rising to £1,900 from January. These adjustments aim to align with consumer behavior and provide more accurate pricing based on actual energy consumption.
While the reduction in energy bills brings some relief, it is essential for households to remain vigilant in managing their energy usage and exploring options for energy efficiency to further alleviate financial burdens.
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