Price cap: Energy bills set to plummet from April – what it means for you
Household energy bills are expected to fall by around 7 per cent from April after the government pledged to cut average cuts of £150.
Industry forecasts suggest energy regulator Ofgem will announce a £117 cut in the energy price cap on Wednesday, reducing the annual cost of a typical dual-fuel home to £1,641 from April 1.
This expected reduction is in line with previous government indications of savings of £150, achieved in part by ending the Energy Company Liability (Eco) scheme introduced by the Conservative government.
However, consumers are warned not to expect a direct £150 discount as the actual savings will fluctuate depending on household size, type and energy consumption. The primary method of this reduction is expected to be a lower price per unit of electricity.
Households are advised to wait for information from their suppliers for specific details following the cap announcement.
Energy analysts Cornwall Insight estimate that the changes will ultimately reduce the cap by around £145 per year when VAT and other pricing allowances are taken into account under the cap methodology.
He added that increases in charges for operating and maintaining the UK’s energy networks offset some of the savings.
Wholesale prices had also increased slightly since the last estimate in December; while the cost of gas was particularly unstable due to “geopolitical factors”.
Looking ahead, Cornwall said wholesale costs were still lower than when Ofgem set the cap level in January and it expected the cap to remain “relatively stable” through 2026, with “only a small increase forecast in July”.
Ned Hammond, deputy director of customer policy at Energy UK, which represents the firms, said: “At a time when many households are struggling with their bills, the Government’s move to deliver a significant discount on energy bills is hugely welcome.
“Although the savings for the average household will be £150, it is important to note that the discount is applied to the unit price. Therefore, households will experience significantly different savings depending on their energy consumption, with some much higher and others much lower than £150.”
“Additionally, other moving parts such as network charges and wholesale costs mean energy bills will not fall in line with the savings made. In fact, the price cap is expected to fall by around £115 from 1 April.”
Which? Energy editor Emily Seymour said: “Households can expect a significant cut to their energy bills in April, which will bring relief to millions of people struggling with cost of living pressure.
“The majority of this change is expected to apply to your electricity price per unit, so your exact savings will depend on your usage – watch for communications from your energy provider in the coming weeks to see how this will affect your bills.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, urged households to note changes in unit costs and fixed charges rather than focusing on the “average energy bill” headline.
He said: “We know energy bills can be confusing and trying to decide when to change tariffs or switch supplier is a big decision that can overwhelm people.
“As well as setting the price cap, Ofgem must play a greater role in ensuring that tariffs reaching the market are fair and do not discriminate against certain groups of customers.
“Unfortunately the onus now falls on households to pay attention to changes in unit costs and fixed charges.”
