Household energy bills to fall as Ofgem reduces price cap by 12%

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Britain’s household energy price cap is set to fall by 12 per cent in April following a fall in wholesale gas and electricity prices.

Energy regulator Ofgem has set the cap for the April to June period at a level which would see typical households paying £1,690 per year, down from £1,928 at present.

That marks the lowest level since March 2022 when it stood at £1,216 and will help the government’s efforts to fight inflation.

However, it remains well above typical levels before the energy crisis that began in the winter of 2021 as wholesale prices started to surge and intensified with Russia’s full-scale invasion of Ukraine in February 2022.

National Energy Action, the fuel poverty charity, warned that 6mn households would still be in “fuel poverty” from April — defined as spending 10 per cent or more of income on energy, down from about 6.5mn now.

“Households in fuel poverty, on negative budgets and in impossible debt will see no chink of light this morning,” warned Adam Scorer, the charity’s chief executive.

Jonathan Brearley, Ofgem’s chief executive, said there remained “big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers”.

The cap limits how much suppliers can charge homes on standard default tariffs for each unit of energy and is reset every three months to reflect changing wholesale energy prices.

The surge in wholesale prices since late 2021 helped fuel a rise in inflation and Britain’s cost of living crisis.

The price cap leapt to a record £4,059 in the first quarter of last year, forcing the government to temporarily step in and subsidise all household energy bills.

Wholesale prices have since eased, with Britain’s benchmark gas prices down 40 per cent since November, helping to push electricity prices down.

But they remain higher than pre-crisis averages, while some other costs that feed into energy bills, such as running the pipes and wires to people’s homes, are inflation-linked and have also risen.

Ofgem is also introducing a temporary charge equating to roughly £28 a year on a typical bill to help suppliers cope with rising consumer debts as many households struggle to pay their bills.

On a per unit basis, the cap for April to June will be 24.5 pence per kilowatt-hour for electricity with a daily standing charge of 60.1 pence, and 6.04 pence per kWh for gas with a daily standing charge of 31.43 pence.

That compares with the current rate of 28.62 pence per kWh for electricity with a daily standing charge of 53.35 pence, and 7.42 pence per kWh with a daily standing charge of 29.60 pence for gas.