Ofgem has revealed it will lower its energy price cap from the current £3,280 per year to £2,074 for the average household in England, Wales and Scotland from July 1st.
Great Britain’s energy price cap will fall to £2,074 a year, this summer. However, households could see little relief, as the government-imposed energy price guarantee (EPG), will come to an end at the same time.
The lowering of the energy price cap could mark the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago, due to rising inflation and the invasion of Ukraine.
The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity.
At its peak, the price cap reached £4,279, and “whilst today’s level is lower than last quarter, it is still above the levels it was before the energy crisis took hold, meaning many households could still struggle to pay bills”, the regulator said.
Over the last year, consumers have been shielded from the dramatic rise in energy bills by the EPG, which limited annual energy costs to £2,500 for the average household – subsidising Ofgem’s price cap. Nonetheless, these government top-ups worth £400 will come to an end in July.
The prime minister, Rishi Sunak, said the reduction in the energy price cap was a “major milestone” in his goal of halving inflation.
Ofgem chief executive Jonathan Brearley said more focus will be needed for the government, the regulator and the industry to support the most vulnerable groups this winter.
“After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction,” he said. “People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.
“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.
“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups. In particular, we will continue to work with government to look at all options.”
Despite government support, the average energy bill could remain almost double the level seen in October 2021. Moreover, households could still face dual-fuel bills above £2,074 if they use more than the typical amount of energy.
Despite the price cap, around 6.5 million people will still live in fuel poverty under the new price cap, according to Ofgem estimates.
Additionally, businesses, charities and public sector organisations such as schools, hospitals and care homes will also stop benefiting from government-funded discounts on the wholesale price of energy.
Georgia Whitaker, a campaigner for Greenpeace UK, said the winter energy crisis “should have been a wake-up call for the government to deliver the nationwide insulation programme and wholesale switch to cheap, renewable- powered heat pumps”.
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, has called on the government to use the summer months to “fix Britain’s broken energy system”, warning that “for millions of people, the energy bills crisis is far from over”
“The sting in the tail to this announcement is that customers are still going to be paying roughly the same for their energy as last winter,” he added. “And after months of inflation and the wider cost-of-living crisis, people are even less able to afford these high energy bills.”
Citizens Advice chief executive Dame Clare Moriarty added: “The fall in the price cap provides some desperately needed respite for households but energy bills will still be nearly double what they were just 18 months ago. That’s unaffordable for millions of households.
“For many, life is getting worse, not better. Year on year we’re breaking records for the number of people struggling with energy debt.”
Energy Security Secretary Grant Shapps said: “It’s positive households across the country will see their energy bills fall by around £430 on average from July, marking a major milestone in our determined efforts to halve inflation.
“We’ve spent billions to protect families when prices rose over the winter, covering nearly half a typical household’s energy bill – and we’re now seeing costs fall even further with wholesale energy prices down by over two thirds since their peak as we’ve neutralised Putin’s blackmail.
“I’m relentlessly focused on reducing our reliance on foreign fossil fuels and powering-up Britain from Britain to deliver cheaper, cleaner and more secure energy.”
Energy is regulated separately in Northern Ireland, where bills are expected to be held at £1,950 per year for an average household.
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Original Source: https://eandt.theiet.org/content/articles/2023/05/britain-lowers-energy-price-cap-to-2-074-a-year-but-bills-could-still-rise/