For the first time this year, energy bills are expected to drop, as the energy regulator Ofgem announced this morning a 7% reduction of the energy price cap for the period of July to September.
This means that energy bills will fall by £129 for an average household using a typical amount of gas and electricity. This follows April’s price cap announcement, which saw an increase of 6.4% and a rise of £111 per typical household.
Now, a household can expect to see their bill reduced by around £11 per month on average, which for a household paying by Direct Debit for dual fuel equates to £1,720 per year. This is everything you need to know.
Ofgem’s price cap, which is set by the regulator every three months, sets a maximum of what suppliers can charge for a unit of energy in England, Scotland and Wales affecting 22 million households. Northern Ireland is not affected by this as it has its own energy market.
The regulator said a recent fall in wholesale prices was the main driver in the reduction, accounting for 80% of the drop. While the price cap is set every three months, Ofgem has stated its annual effect, stating Direct Debit and prepayment customers should see standing charges fall by £19 per year on average.
‘A fall in the price cap will be welcome news for consumers, and reflects a reduction in the international price of wholesale gas. However, we’re acutely aware that prices remain high, and some continue to struggle with the cost of energy,’ said Tim Jarvis, Director General of Markets at Ofgem.
‘The first thing I want to remind people is that you don’t have to pay the price cap – there are better deals out there, so it’s important to shop around, and talk to your existing supplier about the best deal they can offer you. And changing your payment method to direct debit or smart pay-as-you-go can save you up to £136.’
Ofgem has also suggested looking to fix your energy tariff while the prices are lower, stating it could save you up to £200. Currently, 35% of customers are on a fixed tariff, an increase from 15% last year when fewer offers were available.
‘Confirmation that Ofgem’s energy price cap is dropping to £1,720 due to a fall in the international price of wholesale energy prices will be welcome news for households hoping for some relief from the raft of bill hikes that hit consumer finances in ‘Awful April,’ commented Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners.
‘The Cap, which gets reviewed every quarter, is expected to see a further modest fall in October, followed by a further drop in January, according to consultancy Cornwall Insight. While this will be reassuring for households, there are no guarantees as energy prices are vulnerable to volatility.
‘Remember, lower energy prices from July won’t translate into lower household bills across the board. Many bill increases will remain the same following the April uplift, such as water, council tax, car tax and more. Inflation jumped sharply to 3.5% in the 12 months to April as a result of those bill hikes in addition to companies choosing to pass higher employment costs onto consumers.
‘With food prices also rising and expectations that inflation could edge up further from here, keeping a lid on everyday spending will remain important for households that want to retain control of their finances.’
While a reduction in the energy cap is a welcome decision by many customers, it’s still important to know how to save energy and save water at home,- especially considering the increase in other household bills.
If you are struggling with your energy bills, energy bill help is available. For one, you can set up an agreed payment plan with your energy company to help spread the cost. Here’s hoping the next quarter continues the trend of a reducing energy price cap.
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