The energy price cap will fall to £3,280 a year in April – £999 below the current figure – energy regulator Ofgem has announced.

The fall comes off the back of falling wholesale gas prices.

However, households should not expect their bills to decrease, and many are likely to see increases, due to Government support being withdrawn after March.

Here’s everything you need to know about the change to the cap, and what you can expect for your bills.

What is the energy price cap?

The price cap limits the amount a supplier can charge for their default tariff. It was launched in January 2019 by energy regulator Ofgem with the intention of keeping down the cost for households across the UK.

It includes the standing charge (a fixed daily amount you have to pay for energy, regardless of how much energy you use) and the maximum price for each unit of electricity and gas. The price is set per kilowatt hour (kWh).

To show what this might look like for an average person, Ofgem uses a figure of 12,000kWh for a household’s annual gas use when announcing the price cap.

However, this is just a guide to see what the change in price cap does to a typical household’s annual energy bill.

What is the new energy price cap?

The new cap, covering the period from April to the end of June, has fallen to £3,280 per year for the average household. This is significantly down from the January to March figure of £4,279 per year.

For customers with prepayment meters (PPMs), the cap will fall by £1,034, from £4,358 to £3,325 for average dual fuel consumption. Ofgem said the higher price for PPM customers “reflects the higher cost for energy companies to serve them”.

Ofgem CEO, Jonathan Brearley, said: “Today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease.

“If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”

Will energy bills go down?

The new cap will come into force just as Government assistance for households in the form of the Energy Price Guarantee (EPG) becomes less generous.

The EPG initiative was brought in last autumn as a temporary replacement for the price cap in order to protect consumers from sharp price increases, after Ofgem announced a planned 80 per cent hike to the cap.

Under the EPG, suppliers have been further restricted in what they can charge households per unit of energy, with the Government making up the difference. This has kept annual bills for typical households in Britain at roughly £2,500, but the figure is set to rise to £3,000, leaving millions of homes at risk of falling into fuel poverty.

Additionally, the change to the price cap comes after the £400 grant, which has been paid to households in monthly instalments of £66 or £67, finishes.

Analysts at investment firm Cornwall Insight calculated households would see their annual bills rise by approximately £500 as a result of government support ending.

TUC general secretary, Paul Nowak, said: “Energy bills are out of control. The Government must cancel April’s hike. With the cost of wholesale gas plummeting ministers have no excuse for not stepping in.”

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