Ofgem lower energy price cap - but household bills still expected to rise

The amount energy suppliers are able to charge households has been lowered by Ofgem in its latest announcement.

On Monday (February 27) the regulator confirmed the price cap, effective from April 1, will drop from the current £4,279 per year to £3,280 for the average household. Ofgem said the reduction of almost £1,000 reflects recent falls in wholesale energy prices.

However, domestic energy bills are still set to rise by an average of £500 a year despite the reduction as the Government’s support for households becomes more limited. The £3,280 figure indicates how much consumers on their energy suppliers’ basic tariff would pay if the Government’s Energy Price Guarantee (EPG) was not in place.

READ MORE: Households can now apply for another £400 towards energy bills

But customers will pay about 20% more on their bills – approximately £500 – as the Government’s EPG becomes less generous from the beginning of April, leading to an average bill of £3,000. When the upcoming end of the £400 energy rebate scheme – paid in six instalments of £66 and £67 a month – is factored in, the energy cost for households will increase even more.

Ofgem chief executive Jonathan Brearley said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means that on current policy bills will rise again in April. I know that for many households this news will be deeply concerning.

“However, today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the