What the Ofgem price cap change means for your energy bill

Households in the UK will see their energy bills fall after regulator Ofgem announced a £117 cut in the energy price cap. From April 1 the typical annual dual fuel bill will drop to £1,641.

The adjustment dovetails with Chancellor Rachel Reeves’ earlier promise of a £150 cut to average household bills. The price ceiling, first set in 2019, determines the maximum amount energy suppliers can demand per unit of gas or electricity.

Here’s what you need to know about the Ofgem price cap and what it means for your energy bills.

What is Ofgem’s price ceiling?

The energy price cap sets the maximum price that suppliers can charge customers in England, Scotland and Wales for each unit of gas and electricity they use.

It also sets the maximum daily fixed charge (the cost of connecting your home to the grid).

The price cap figure provided by Ofgem shows how much a household using gas and electricity and paying via direct debit could expect to pay if energy consumption was normal.

It’s important to note that this doesn’t limit a home’s total bills, because people still pay for the amount of energy they use; that is, they will pay more if it is above average and less if it is below it.

In Northern Ireland energy is regulated separately.

What’s changing on my energy bill this time?

The price cap, which will apply from April 1, will be the first to reflect Chancellor Rachel Reeves’ promise last November that £150 would be cut from the average household bill.

It achieves this by shifting 75% of Renewable Energy Obligation (RO) costs from household energy bills to general taxation and by scrapping the Energy Company Obligation (Eco) scheme introduced into government by the Conservatives, which was funded by bills and designed to tackle fuel poverty by improving housing conditions but is beset by delivery problems.

This situation will be reflected in customer bills mainly by reducing household electricity unit prices.

Why don’t I see a £150 discount on my bill?

The rebate will be applied at a lower rate for each unit of energy used, rather than a one-off amount.

It’s also worth highlighting that the £150 figure is an average and amounts will vary depending on the size and type of household and how much energy they use.

Increases in costs associated with operating and maintaining gas and electricity networks, paid from customer bills, offset some of these savings.

Do I need to do anything?

Households should pay attention to information from their suppliers announcing price reductions, particularly on the rates they pay for each unit of gas and electricity.

This information will be important for those considering switching from the cap to a cheaper fixed tariff and for those looking for a new fixed tariff, as comparing unit prices is key to finding a good deal.

Is now a good time to switch?

It’s always worth investigating fixed deals, taking into account any length of time obligations that may result in exit fees.

As a general rule, Which? He recommends looking at deals that are cheaper than the price cap (it’s important to compare gas and electricity unit prices rather than looking at headline figures here), are no longer than 12 months and don’t require significant exit fees.

But the End Fuel Poverty Coalition said it understands that some flat tariffs will include a cap cap but some will not.

He warned that this could “make it even harder to measure” replacement and fixing, which is already a confusing process for some.

Households may choose to wait for the dust to calm down before signing a fixed-term deal or switching suppliers, Wednesday’s announcement said.

Will prices continue to fall or should we expect increases in the future?

Cornwall Insight currently expects the price cap to remain relatively stable through 2026, with a small decline forecast in July.

But those estimates could change as wholesale markets change and potential policy cost announcements materialize, he said.