British energy bills fall after price cap is cut
Britain’s energy regulator has cut the price cap on domestic energy bills by £1,206 following a plunge in wholesale gas and electricity prices.
The price cap will drop to £2,074 a year for the typical household from July, down from £3,280 for the past three months.
The cap regulates how much energy providers can charge customers for default tariffs, although the government has been footing part of household bills since October.
The reduction in the level of the cap means that public support will end, while the typical household will pay around £426 less per year.
However, bills below the cap will still be around 60 per cent higher than when energy prices started in late 2021 – the period before the Russian invasion of Ukraine – which has helped boost UK inflation and the cost of living. crisis.
Jonathan Brearley, chief executive of energy regulator Ofgem, said: “People should see cheaper energy bills from early July and this is a welcome step towards lower costs.
“However, we know that people are still struggling, the cost of living crisis will continue and these bills will continue to worry many people across the country.”
The price cap introduced in 2018 sets a limit on how much service providers can charge households for each unit of electricity and gas.
The £2,074 level reflects estimates for typical households below the cap, but actual bills will vary depending on usage.
The new unit is capped at 30 pence for every kilowatt hour of electricity and 8 pence for every kilowatt hour of gas, compared to the previous 51 pence for every kilowatt hour of electricity and 13 pence for every kilowatt hour of gas.
Fixed rates will remain the same: 53 pence for every kilowatt hour of electricity and 29 pence for every kilowatt hour of gas.
The price cap resets every three months to reflect changing wholesale costs. It began rising in April 2022 after wholesale gas and electricity prices spiked in connection with Russia’s invasion of Ukraine.
It reached £3,549 in October and then £4,279 in January, compared to previous years of under £1,280.
The government stepped in to protect households, capping typical bills at £2,500 and paying households the difference between the rate and the price cap.
It is estimated that the price guarantee, which runs until next March, will cost the state £29.4 billion.
Wholesale energy prices have eased due to a relatively mild winter and energy conservation efforts in Europe, but remain above historical norms.
Energy UK, the trade group representing energy retailers, has warned that a price cap above £2,000 will be the “new normal”.
He said the industry must now work with the government to provide targeted support to customers next winter.
“We also need to make progress in expanding our own domestic sources of clean energy and making our homes more energy efficient,” said Energy UK, “as these will permanently lower energy costs for all consumers.”