The average household energy bill will be slashed by £426 a year when Ofgem lowers its price cap in the coming weeks.
The cap - which limits the maximum amount suppliers can charge customers for their energy usage - will be lowered to £2,074 annually from its current £3,280 per year. The energy regulator said the £1,206 reduction to the cap reflected recent falls in wholesale energy prices.
The new price cap will come into effect from Saturday, July 1. The lower cap will replace the Government’s Energy Price Guarantee (EPG), which currently limits the typical household energy bill to around £2,500.
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It means the average household will see their annual bill drop by £426. The cut to the cap marks the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago, Ofgem said.
At its peak, the price cap reached £4,279 and, “whilst today’s level is lower than last quarter, it is still above the levels it was before the energy crisis took hold, meaning many households could still struggle to pay bills”, the regulator added.
Ofgem chief executive Jonathan Brearley said more focus will be needed for government, the regulator and the industry to support the most vulnerable groups this winter. Mr Brearley said: “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction. People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.
“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.
“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups. In particular, we will continue to work with government to look at all options.”
Energy Security Secretary Grant Shapps described the price cap drop as “positive." In a statement, the Cabinet minister said: “It’s positive households across the country will see their energy bills fall by around £430 on average from July, marking a major milestone in our determined efforts to halve inflation.
“We’ve spent billions to protect families when prices rose over the winter covering nearly half a typical household’s energy bill, and we’re now seeing costs fall even further with wholesale energy prices down by over two thirds since their peak as we’ve neutralised (Vladimir) Putin’s blackmail.
“I’m relentlessly focused on reducing our reliance on foreign fossil fuels and powering-up Britain from Britain to deliver cheaper, cleaner and more secure energy.”
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