Energy industry regulator Ofgem is lowering the price cap by £17, reducing energy bills for millions of British consumers. The new default price cap and pre-payment meter ceiling will begin in April with an estimated 15 million households affected.
The default price cap currently protects about 11 million households and will be reduced from £1,179 to £1,162. The pre-payment meter cap protects another 4 million households and will drop from £1,217 to £1,200 per year. These changes will last for six months between April and September.
Protection Against Standard Variable Tariffs
The cap was originally introduced to protect customers on standard variable tariffs, usually the most expensive and exploitative rates. Ofgem reserved the right to raise or lower it according to legitimate wholesale energy price fluctuations. Falling wholesale prices on the energy market mean the energy watchdog can now pass those savings onto the customers.
The Government’s Energy Minister, Kwasi Kwarteng, said: “The price cap is saving the average bill payer between £75 and £100 per year, helping everyone get through the cold weather without worrying about costs.”
The drop in price was predicted a couple of months ago, when wholesale gas prices dropped by half. The price drop happened because of the global market store of gas increasing thanks to an influx. The USA, Russia and Qatar were the main suppliers of these new and plentiful gas supplies in Europe.
Shop Around For a Better Deal, says Ofgem Chief
Ofgem’s Chief Executive, Jonathan Brearley, said a total of £1 billion had been saved by households since the cap’s introduction. He also encouraged consumers to shop around as households could make even bigger savings by switching suppliers.
Consumers switching suppliers from a default tariff to a cheaper fixed-term deal can potentially save hundreds of pounds per year.
Energy Efficiency Still ‘Most Effective Way’ to Lower Bills
Energy industry trade association Energy UK welcomed the price cap reduction with an online statement. They also added that the best long term method for reducing bills was energy efficiency. The statement read: “The vast majority of a typical energy bill is made up of costs that are outside of an energy company’s direct control, with wholesale costs accounting for the biggest proportion. Today’s announcement reflects that there has been another fall in wholesale costs since Ofgem last set the cap level.
“The most effective way to lower customer bills for the longer term is through energy efficiency, which saves both energy and money while also helping the environment. Therefore we hope to see measures in the forthcoming Budget for a government-funded National Energy Efficiency Programme which we have long called for.”
As well as increasing energy efficiency, switching suppliers seems to be a growing tactic among consumers seeking lower bills. Last year saw a record number of customers changing their energy supplier to secure a lower fixed-term tariff.
To learn more about different energy suppliers and tariffs, contact Business Save and their team of highly experienced energy experts.