People in England, Scotland and Wales are set to see a significant drop in their energy bills in July after Ofgem slashed the energy price cap. The regulator said a typical household will now pay £2,074 a year on its gas and electricity bill - £426 a year less than the current rate.
The cut marks the end of the government’s Energy Price Guarantee which, since October last year, has limited the typical household bill to £2,500. It could also signal the return of competition to the market, with people able to shop around for the best deals - as well as the reintroduction of fixed-rate tarriffs.
Ofgem sets the maximum price that can be charged per unit of gas and electricity to households on variable or default tariffs in England, Scotland and Wales. It has been superseded by the government’s Energy Price Guarantee since October, but this will expire at the end of June.
A £400 discount on everyone’s energy bills, provided by the government to help households during the winter, came to an end in April. About 29 million households will be affected by the change in the cap.
However, there will be some differences in typical payments from July:
- Those who pay via a prepayment meter will pay a similar rate to those on direct debits at £2,077 a year
- Those who pay by cash, cheque or bank transfer, usually every three months, will have to pay more, with a price cap of £2,211 a year
- In Northern Ireland, which is regulated separately, bills will be held at £1,950 per year
Ofgem boss Jonathan Brearley told BBC’s Today Programme that while it was good news energy prices will fall from July, they are still “relatively high” - and likely to stay that way “for some time”. He said: “In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis.”
He added that people should contact their supplier for support if necessary and that he was “very hopeful” energy firms would reintroduce competitive fixed-price deals, so that “customers will get a better deal than the price cap”.
But Money Saving Expert founder Martin Lewis told the BBC that he did not expect to see firms publicising these kinds of deals right off the bat. He said: “I’m expecting to see existing customer offers - where you will get a bespoke offer from your firm rather than you being able to go into a comparison site and switch to deals that are offered across the market.”