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Ofgem announces significant energy price cap

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ofcom announce energy price cap

The energy regulator, Ofgem, declared today that the energy price cap – which restricts the maximum rate charged by energy companies – will see a significant reduction.

This will be a welcomed announcement to many people, especially since energy costs have significantly increased in the last twelve months, which has been a part of the struggle with the rising cost of living.

The termination of the government’s energy bill assistance last month has likely caused anxiety for many people in regards to meeting their energy expenses.

What is the new energy price cap?

Ofgem has announced that the new energy price cap is £2074.

This has decreased from £3,280 in April, when Ofgem published its previous price cap, and £4,279 at the start of 2023.

Despite the drop, the price of typical annual household energy bills is still substantially higher than it was when the price cap was initially established. In January 2019, consumers paid just £1,137 per year.

Consultancy Group Cornwall Insights has predicted that household bills will remain high for years to come, stating: ‘Despite the cap falling from the sky-high prices of the past two years, the figure remains over £1,000 per year more than the price cap levels seen prior to the pandemic.

‘We do not currently expect bills to return to pre-2020 levels before the end of the decade at the earliest.’

On the new cap, Emily Seymour, Which? Energy Editor, said: ‘The news that the energy price cap will come down to £2,074 a year for the typical household from July is positive, but many will understandably be confused about what exactly this means for them and their monthly outgoings. 

‘While the new price cap on variable tariff rates will see typical bills drop by around £500, energy bills will be almost double the amount they were before the energy crisis began and these prices will still be unaffordable for many households. If you are concerned about struggling to pay higher bills, there is help available. Speak to your energy provider about a payment plan you can afford and check to see if you qualify for any government schemes.

‘If prices start to stabilise, we may see some providers offering competitive fixed price energy deals for the first time in well over a year, so it will be worth doing a bit of research to see if there’s a deal that could be cost effective while also offering good customer service and low exit fees.’

Since October 2022, household energy bills have been lower than the price cap due to the Energy Price Guarantee, which provides a discount on top of the price cap.

How will the price cap drop affect bills?

The new energy price cap means that typical annual household bills are now capped at £2074.

Dr Craig Lowrey, from Cornwall Insight, has said that this is good news for bill payers, who should ‘see bills drop by around £450 compared to the existing levels of the energy price guarantee, with bills currently predicted to stay relatively stable over the next nine months’.

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