Households across England, Wales and Scotland are set to see some welcome relief this April as Ofgem announces a 7% reduction in the energy price cap.
For households on variable tariffs governed by the price cap, the average drop works out to around £10 a month for typical energy usage. This makes the upcoming reduction the biggest fall since last summer.
While the headline figure sounds hopeful, it comes with a catch: prices are still around one-third higher than before Spring 2022, leaving many households continuing to feel the strain.
Energy bills are made up of a mix of charges, not just the cost of gas and electricity, but also the cost of maintaining energy networks and the cost of government energy policies. In November’s Budget, Chancellor Rachel Reeves announced a major shift with:
- the Government is scrapping the Energy Company Obligation (ECO) scheme
- some energy policy costs are being moved into general taxation
Together, these changes were expected to cut the typical bill by £150 a year. However, at the same time, the cost of running and upgrading the energy network; power lines, gas pipes and cables has risen by about £6 a month, reducing the overall saving.
As a result, a typical household under the price cap will see their annual bill fall by £117 to £1,641.
Not Everyone Will See the Same Savings
The reduction is applied mainly through a lower price per unit of electricity. That means:
- High electricity users including households reliant on medical equipment will see the biggest benefit
- Low electricity users who rely heavily on gas will see smaller reductions
- Households on fixed tariffs may also receive savings, but suppliers will contact them directly with the specifics
Even as energy bills are set to fall, many other household expenses are going the opposite direction:
- Water bills are rising sharply in many areas
- Council tax is increasing
- A range of other everyday costs continue to creep up
Years of high energy costs have taken a toll with UK households collectively owing over £4 billion to energy suppliers, a stark reminder of just how many people are struggling. Even with April’s reductions, millions are still urged to shop around for better deals and if they are struggling to contact their supplier to find out about the support schemes available.
N.B. The energy price cap does not apply if you live in Northern Ireland, where the energy sector falls under the remit of the Utility Regulator.
