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Britain’s household energy bills are set to fall in the summer after regulator Ofgem lowered the price cap by 7 per cent, in a boost to Sir Keir Starmer’s government as it tries to tackle the high cost of living.
Ofgem on Friday set the price cap for July to September at a level that would see typical households pay £1,720 a year, down from £1,849 at present, following a fall in wholesale gas costs.
It is the first decrease in the price cap since July last year and will provide some relief for households struggling to pay energy bills.
But typical bills are still several hundreds of pounds higher than before the energy crisis that started in late 2021.
Craig Lowrey, principal consultant at market analysts Cornwall Insight, said the reduction in the cap was a “welcome development” but there was a risk that “energy will remain unaffordable for many”.
He urged the government to “continue to explore targeted support, including social tariffs, to ensure those most in need are not left behind as the market evolves”.
It comes as the government this week said it would backtrack on cuts to winter fuel payments for pensioners, following a public backlash.
Utility bills helped push inflation to a 15-month high of 3.5 per cent in April, according to official figures released this week, dampening expectations of interest rates cuts from the Bank of England.
Cornwall Insight said wholesale gas costs had fallen in recent months, partly due to mild temperatures and the prospect of a slowing demand in the US.
Gas prices have a knock-on effect on the price of electricity in Britain due to the important role of gas-fired power stations.
The price cap, introduced by the Conservative government in 2019, sets a limit on how much energy companies can charge domestic customers on default tariffs, per unit of energy consumed. It is reset every three months to reflect changes in wholesale prices.
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