Energy bills are poised to decrease for many households this spring following the recent announcement of a new price cap by Ofgem. Starting from April 1, the typical household’s price cap will drop from £1,758 to £1,641, representing a 7% reduction or £117. The actual amount saved will vary based on individual gas and electricity usage.
Each £100 spent on energy currently will see a reduction of around £7 come April. This decrease is attributed to measures introduced by the Government during the last November Budget. Chancellor Rachel Reeves disclosed that £150 would be shaved off energy bills in April by eliminating the Energy Company Obligation and Renewables Obligation.
Despite these savings, additional costs have been added to bills, such as network maintenance expenses, partially offsetting the savings. Wholesale prices have also slightly increased. Ofgem revises its price cap every three months, with the new rates set until June 30, when they will be reevaluated.
Households are encouraged to explore fixed tariff deals to further cut costs. Switching to a cheaper fixed tariff could lead to savings of up to 19% compared to sticking with the price cap. Currently, there are 30 fixed energy deals available that are cheaper than the price cap, with potential savings of up to £260 for the average household.
Tim Jarvis of Uswitch.com emphasized the importance of taking action to capitalize on these savings. Ofgem’s Director General, Markets, Tim Jarvis, credited the reduction in the price cap to policy changes announced in the budget, aiming to control costs and support long-term energy system stability.
The Ofgem price cap sets the maximum unit rates and standing charges, rather than capping the total energy bill. Average unit rates for gas and electricity are set to change, with standing charges also adjusting. The price cap applies to those on a standard variable rate tariff, encompassing around 33 million customer accounts.
Wholesale energy costs, network maintenance, operating expenses, and other factors influence the price cap. Cornwall Insight predicts a relatively stable price cap in 2026, with minor fluctuations expected. Dr. Craig Lowrey highlighted the importance of ongoing savings and investments to ensure a secure and resilient energy system.
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