Ofgem’s 12.3% drop in the price cap to £1,690 signals relief for consumers amid ongoing challenges
As of April 1, 2024, the typical yearly energy bills for households in England, Scotland, and Wales are set to witness a substantial decrease, falling to £1,690. This marks their lowest point in over two years, thanks to the decision by the Office of Gas and Electricity Markets (Ofgem) to lower the price cap in response to changes in wholesale prices. The price cap, previously set at £1,928 for an average dual fuel household, will now drop by 12.3%, offering consumers a tangible reduction of £238 per year, or approximately £20 per month.
Jonathan Brearley, the Chief Executive of Ofgem, expressed his satisfaction, stating that it was ‘good news’ for consumers to witness the price cap at its lowest level since Russia’s invasion of Ukraine in February 2022. This geopolitical event had a significant impact on the wholesale energy market, leading to increased costs for both suppliers and customers.
Brearley acknowledged the progress but emphasized that challenges persist, stating, “there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers.” He highlighted ongoing efforts to levelize standing charges to address inequities faced by prepayment meter users, particularly vulnerable individuals facing higher upfront charges. Additionally, Brearley emphasized the need to address the risk posed by high levels of debt in the energy system.
In response to these challenges, Ofgem has taken steps to introduce a temporary payment of £28 per year (£2.33 per month) to support struggling customers. The payment will be added to the bills of consumers who pay via direct debit or standard credit, partially offsetting the end of an £11 per year allowance that covered pandemic-related debts.
Dame Clare Moriarty, the Chief Executive of Citizens Advice, welcomed the reduction in energy costs but cautioned that the impact of previously high prices would be felt for years. She expressed concern about the government missing its own deadline for a new plan for energy bill support and the potential challenges faced by those already struggling to make ends meet.
Ofgem’s commitment to addressing standing charges for prepayment meter customers is notable. The regulator aims to create a permanent solution financed by bill-payers to ensure fairness. This move could lead to prepayment customers saving approximately £49 per year, with direct debit customers paying £10 more annually.
The quarterly energy price cap will change from 1 April 2024
— Ofgem (@ofgem) February 23, 2024
The new #PriceCap is £1,690
The level is based on typical use of an average household on their default tariff
It's a cap on energy unit price, not a cap on total bills
More ⬇️https://t.co/iTQdoETRN1🧵 1/2 pic.twitter.com/39qCqmYqxN
Simon Francis, the coordinator of the End Fuel Poverty Coalition, called attention to the persistent challenges, noting that despite the recent reduction, energy prices remain significantly higher than pre-crisis levels. He urged political unity to enact measures to end fuel poverty, including long-term plans to upgrade homes and short-term financial support for households in need.
As the energy landscape continues to evolve, the reduction in the price cap brings momentary relief to consumers, emphasizing the need for comprehensive, long-term solutions to address the systemic challenges in the energy sector.
