UK energy bills to fall after Ofgem lowers price cap by 7%

LONDON (Reuters): Millions of British households will have cheaper energy bills from October after British energy markets regulator Ofgem cut its price cap again to reflect a further fall in wholesale power and gas prices.

Ofgem on Friday lowered its price cap on household energy bills by about 7% from Oct. 1 to 1,923 pounds ($2,418.56) a year for a typical dual-fuel household.

The drop will save households an average of 151 pounds compared with the previous quarter, Ofgem said.

The drop also represents the lowest level since October 2021 and reflects further falls in wholesale energy prices as the market stabilises and suppliers return to a healthier financial position after four years of losses, it added.

Wholesale power and gas prices hit record highs in Britain and Europe last year after Russia’s invasion of Ukraine cut gas supplies.

Although wholesale gas and power prices have fallen by about 85% and 80% respectively since record highs in the first quarter of last year, there is still price volatility and the price cap remains well above the average before the energy crisis took hold.

“It is welcome news that the price cap continues to fall. However, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter,” said Ofgem Chief Executive Jonathan Brearley.

About 29 million customers are on standard rate tariffs protected by the price cap, which was introduced in 2019 to protect consumers.

Ofgem sets the cap using a formula that includes suppliers’ network costs and environmental and social levies, with wholesale energy prices the largest factor. It reviews the cap every quarter to reflect movements in the wholesale market.

The regulator also said it has introduced measures to reduce costs for customers on pre-payment meters and ensure extra support for those facing disconnection from the network.