Households could pay £297 less on energy bills as regulator slashes price cap

Most households’ energy bills could plunge by nearly £300 a year to its lowest level since 2022, the energy regulator is set to confirm today.

Ofgem will announce its latest price cap, with energy consultancy Cornwall Insight predicting it will lower by around £293 a year.

That would see the typical household’s bill falling from £1,928 a year to £1,635 from April 1, a drop of around 15 per cent.

Energy bills are expected to continue falling over summer.

Cornwall Insight said: “We are forecasting the cap will continue to decline in July, with a small rise in October. However, the latest projections indicate that the cap will stay below the current level until the end of the year.

“This suggests the UK has, for now, weathered the storm of Red Sea tensions, securing a steady supply of liquefied natural gas (LNG) through the Atlantic.”

The average cost of powering a home will still be well above what it was in April 2021 when the price cap stood at £1,138.

Britain continues to be reliant on importing expensive gas from countries which could decide to stop selling to Britain, campaigners warned.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said: “Even if Ofgem drops the energy price cap slightly as expected on Friday, energy prices will still be around 50% higher than they were before the energy bills crisis began.

“This means that since the start of the energy crisis, the average household has spent £2,300 more on energy bills than they would have done had prices remained stable.

“These vast sums are placing an unbearable strain on household finances up and down the country and spending on other goods is down, forcing Britain into recession. Household energy debt is at record levels, millions of people are living in cold damp homes and children are suffering in mouldy conditions.”

The Chancellor has been urged to offer households who improve the energy performance of their homes a stamp duty rebate at the budget next month.

The incentive, a stamp duty rebate applied where a homeowner upgrades their home’s energy performance within 2 years of purchasing a property, would save households £348 on average on their energy bills every year.

The Better Homes Alliance – an independent group of organisations which includes Airbnb, E.ON UK, and Lloyds Banking Group – said the idea has received the backing of the Conservative Environment Network caucus of Tory MPs.

Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, said: “There is not enough gas left in the North Sea to move the dial on internationally set prices so new licences for UK oil and gas are a red herring. Lower bills and energy independence will come from reducing our gas demand, through insulating homes and moving away from gas boilers.

“That ought to be the priority of any Government that wants bills lowered and British energy powering British homes.”

Consumer appetite for switching energy suppliers seems to be “severely dampened” by a perceived lack of deals in the market, analysts at KPMG said.

One in three people polled (34%) no longer shop around because prices are capped.

Meanwhile four in 10 (41%) said they would like to switch to a fixed deal but options are limited.

The survey of 1,700 bill payers carried out by YouGov this month, found there was widespread awareness of the price cap.

Nearly 85% of bill payers said they were aware of the measure which limits how much suppliers can charge for each unit of electricity or gas used.

Of them 87% correctly understood its purpose.

Simon Virley, vice chair and head of energy and natural resources at KPMG in the UK, said: “Five years after introducing a cap on energy prices, and following two years of record high energy prices, consumer appetite for switching suppliers seems to be severely dampened by a perceived lack of deals in the market.

“With prices now falling rather than rising, hopefully this will spark a new range of fixed price deals.

“The price cap was always intended to be a temporary measure to protect ‘sticky’ customers, while the energy market was reformed. But this protection appears to have come at some cost in terms of limiting choice and stifling innovation.  

“We now need a national conversation about the future of our retail energy market – one that balances appropriate consumer protection with incentives for investment and innovation in a smarter energy system that benefits all consumers.”