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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 mean a typical household pays £1,720 per year, down from £1,849 at present, following a fall in wholesale gas prices.
It is the first reduction in the cap since July 2024 and will provide some relief for households struggling to pay energy bills.
Utility bills helped drive inflation to a 15-month high of 3.5 per cent in April, according to figures released this week, dampening expectations of interest rate cuts from the Bank of England.
Despite the cut in the cap, typical energy bills are still several hundreds of pounds higher than before the energy crisis that started in late 2021. The cap also remains higher than last summer’s level, Ofgem said.
Craig Lowrey, principal consultant at market analysts Cornwall Insight, said the reduction in the cap was a “welcome development” but there remained 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”.
The price cap, introduced in 2019, sets a limit on how much energy companies can charge homes on default tariffs per unit of gas and electricity consumed. It is reset every three months to reflect changes in wholesale prices.
Gas heats the vast majority of Britain’s homes and is used to generate more than one-third of its electricity, meaning any changes in wholesale prices have an impact.
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.
Ofgem’s move comes as the government this week said it would backtrack on cuts to winter fuel payments for pensioners, following a public backlash.