Ofgem to lower energy price cap amid warnings households will feel little relief
Ofgem is expected to announce a £450 drop to its energy price cap on Thursday amid warnings that consumers are likely to feel little benefit to their household finances.
Consultancy firm Cornwall Insight predicts the price cap will fall by £446 to £2,054 a year, based on falling wholesale energy prices.
However, campaigners have warned that the lower cap is unlikely to provide much relief to households that struggled to pay their bills over the winter because the Government’s support schemes have come to an end.
The price cap has rocketed from £1,162 a year for a typical household in August 2021 to its current level of £3,280, having briefly reached £4,279, with the pandemic and Russia’s war in Ukraine both pushing up wholesale prices.
Customers have been partly shielded from the most recent rise by the Government’s Energy Price Guarantee, which limits annual energy costs to £2,500 for the average household – below Ofgem’s price cap.
This will change in July when the price cap falls and the threshold for the guarantee rises to £3,000.
The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity, so those who use more energy will pay more.
Furthermore, the Government’s £400 winter discount to every household, paid in six instalments, ended in March.
Only those in receipt of means-tested benefits, pensioners and those with disabilities are currently set to receive further help with their energy bills, amounting to £900, £300 and £150 respectively.
The standing charge – the roughly £300 paid each year by households just to access gas and electricity, is unlikely to fall.
Cornwall Insight warned that, while bills were falling, it did not expect them to return to pre-Covid levels “before the end of the decade at the earliest”.
It added that energy bills were still about £1,000 higher compared to 2021.
Energy is regulated separately in Northern Ireland, where bills will be held at £1,950 per year for an average household.
Fuel poverty charity National Energy Action (NEA) warned that while a cut to the price cap “might seem like good news”, bills in July would be comparable to last winter because of the end to the Government’s support.
NEA chief executive Adam Scorer said: “Coming out of winter, most people will welcome any respite from record high prices, but it still leaves prices more than 80% higher than the start of the energy crisis and two million more households trapped in fuel poverty.
“More than two and a half million low income and vulnerable households are no longer receiving any Government support for unaffordable bills. For them, the energy crisis is far from over.”