Millions of households will receive notifications on Wednesday regarding the upcoming reduction in their energy bills starting from April. The regulatory body Ofgem regularly updates the price cap every three months, affecting customers on standard variable tariffs. This time, the adjustment includes a £150 discount introduced by Chancellor Rachel Reeves in the Budget to alleviate the financial burden on consumers.
Industry experts at Cornwall Insight project a decrease of £117 to £1,641 annually for a typical dual fuel household. It is essential to note that the price cap sets the highest amount energy providers can bill for each energy unit and the standing charge, with the total bill varying based on consumption.
Despite expectations of a £150 yearly saving, the actual average reduction for households is estimated at £134 due to the removal of certain policy costs and the introduction of increased electricity standing charges. While 98% of households will witness a drop in bills, the extent of savings hinges on individual energy usage.
The Resolution Foundation forecasts that approximately 7.5 million households will save less than £100, while 6.8 million could benefit by over £200 and 1.8 million by more than £300. The savings will predominantly favor households with high energy expenditures, such as those with electric heating, larger families, or elevated electricity demands for medical purposes.
The adjustment in the unit rate rather than the standing charge may disappoint low-energy users who still incur daily charges. Out of around 34 million standard variable tariff accounts, including six million with prepayment meters, 21 million are on fixed tariffs and hence unaffected by Ofgem’s price cap.
Following confusion surrounding the Budget’s saving announcement, the government clarified that the savings are expected to reach customers on fixed tariffs starting April 2026. While the most significant impact will be felt in the initial year, the effects will persist to some extent for three years, although diminishing due to policy changes and additional costs.
Despite fluctuations, the Resolution Foundation anticipates that annual bills will remain approximately £60 lower than current levels until 2029.