The Ofgem energy price cap is falling from £1,758 to £1,641 for the typical dual fuel household from April
Energy bills are set to fall for millions of households this spring – but a big shock could be on the way later this year.
The Ofgem price cap is falling from £1,758 to £1,641 for the typical dual fuel household from April. The decrease in the April price is down to measures announced by the Government in the autumn Budget last November.
Chancellor Rachel Reeves revealed that £150 would be cut from energy bills from April by removing the Energy Company Obligation and Renewables Obligation.
However, some of this saving has been offset by other costs that are added to bills, including network maintenance and higher wholesale costs.
The April price cap rate will run for three months, until July, when current predictions say bills will go up again because of the Iran war.
Energy consultancy Cornwall Insight said its forecast for the July price cap is now £1,973 a year for a typical household – an increase of £332 or 20% on April’s cap.
This is down to significant increase in gas prices caused by the increased geopolitical tensions in the Middle East. The forecast from Cornwall Insight is likely to change as we get nearer to the July price cap being confirmed.
Despite what its name suggests, the Ofgem price cap does not put a limit on how much you can pay for energy – instead, it sets the maximum unit rates and standing charges.
The standing charge is a fixed fee you pay to be connected to the grid. This means your bill is still based on the amount of energy you use, and it can be higher or lower than the headline price cap figure.
The price cap figure represent what the typical billpayer can expect to pay, based on how much energy Ofgem estimates that the average household uses.
Your location can also effect your bill, as unit rates vary depending on region. There are also different rates for prepayment customers and those who pay on receipt of bill.
Confusingly, the energy price cap figure represents a yearly bill, but it is updated every three months so Ofgem can reflect changing wholesale costs.
The Ofgem price cap covers anyone on a standard variable rate (SVR) tariff. You are likely on an SVR tariff if you are not fixed into an energy deal.
There are about 33 million standard variable tariffs customer accounts, including six million with prepayment meters. You can contact your current energy supplier to see what type of tariff you are on.
But unusually, the savings for the April price cap will also apply to fixed rate tariffs due to the change in policy costs.
If you are fixed rate customer, you do not need to do anything – your energy supplier will be in touch to outline the changes to your tariff.
