More than 11 million people in the UK will benefit from cheaper energy bills this April after Ofgem lowered the price cap.
The energy price cap was introduced by Ofgem at the beginning of 2019 with the intention of protecting customers on standard variable tariffs from being ripped off. The cap is reviewed twice a year by the energy regulator, and it just been announced that it will be lowered by £17 from April.
The annual energy bill for the average household will fall from £1,179 down to £1,162 after the cap reduction. The prepayment meter cap will also fall, from £1,217 to £1,162 per year for a household with average energy usage.
According to Ofgem, more than 11 million households across the UK are on their supplier’s default or standard variable tariff and will thus benefit from the cap reduction. Together with prepayment meter customers, a total of around 15 million households will have lower energy bills this year.
Ofgem said that a fall in the wholesale price of energy between August and January was the main factor behind the lowering of the energy price cap.
“A strong supply of gas, such as record amounts of liquefied natural gas and healthy gas stock inventories, has been the main factor pushing down wholesale prices,” said Ofgem.
“These reductions offset cost increases totalling £22 of other elements such as operating costs, network charges, smart meter costs and environmental schemes, resulting in an overall reduction of £17 in the level of the default tariff cap.”
Jonathan Brearley, chief executive of Ofgem, said: “The default price cap is designed to protect consumers who do not switch from overpaying for their energy, whilst encouraging competition in the retail market.
“Suppliers have been required to become more efficient and pass on savings to consumers. In its first year, the cap is estimated to have saved consumers £1bn on average on their bills and switching rates have hit record levels.
“Today’s announcement is further good news for the 15 million households covered by both price caps who will see their energy bills fall in April. Households can reduce their energy bills further by shopping around for a better deal.”
Natalie Hitchins, head of home products and services at consumer group Which?, said: “This latest cut to the price cap may bring some light relief to customers, but a recent surge in cheap energy deals could mean millions of people still stuck on poor value default tariffs are paying hundreds of pounds per year more than they need to.
“We would urge anyone fed up with expensive bills to take advantage of the wider choice in cheap deals and switch suppliers – you could save hundreds of pounds a year and find a firm that offers better customer service.”
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