Ofgem has dropped its energy price cap by £450 amid warnings that consumers are likely to feel little benefit to their household finances.
The price cap rocketed from £1,162 a year for a typical household in August 2021 to £3,280, having briefly reached £4,279, with the pandemic and Russia’s war in Ukraine both pushing up wholesale prices.
Energy regulator Ofgem has dropped its price cap to £2,054 a year, but campaigners have warned that the lower cap is unlikely to provide much relief to struggling households due to the ending of Government support with energy bills.
The cap, which will last for three months beginning on July 1, 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, so those who use more energy will pay more.
Consumers had been partly shielded from the previous rise in the energy price cap almost two years ago due to the Government’s Energy Price Guarantee, which limits annual energy costs to £2,500 for the average household.
But this is due to come to an end in July when the price cap falls and the threshold for the guarantee rises to £3,000.
The Government’s winter discount to every household – £400 paid in six instalments – also ended in March, meaning only those in receipt of means-tested benefits, pensioners and those with disabilities will now receive further help with their energy bills, amounting to £900, £300 and £150 respectively.
The standing charge – the roughly £300 paid each year by households just to access gas and electricity, is unlikely to fall.
Consultancy firm Cornwall Insight has warned that energy bills are still about £1,000 higher compared to 2021, and while bills are falling, it does not expect them to return to pre-Covid levels “before the end of the decade at the earliest.”
Meanwhile, fuel poverty charity National Energy Action (NEA) has warned that while a cut to the price cap “might seem like good news”, bills in July will be comparable to last winter because of the end to the Government’s support.
Martin Lewis warned it’s less likely that standing charges will drop, so families will still pay around £300 a year just for the facility of having gas and electricity.