Energy regulator Ofgem has today (27 February 2023) announced that the price cap will be reduced from £4,279 to £3,280, but household bills are expected to rise as government support eases
The Ofgem price cap falls announcement that the energy price cap will fall has been met with a mixed response, as the move will coincide with government support for struggling households easing.
Ofgem said the energy price cap fall was to reflect wholesale prices dropping and that the £3,280 figure was calculated in line with how much consumers on an energy suppliers’ basic tariff would pay if the government’s Energy Price Guarantee (EPG) were not in place.
Many households will pay more as support schemes taper off
The EPG will continue to support bill-payers until March 2024, as stated by the chancellor last November. However, the energy rebate scheme, which discounted energy bills by £400 across six payments will come to an end in March.
Customers on top-up prepayment meters will also pay around £45 more a year than a direct debit customer from April, as a result of higher fixed costs.
Houses covered by the Government Energy Price Guarantee– set to increase from £2,500 a year to £3,000 in April- will still see a bill increase of roughly 20% to reach the new Ofgem energy price cap of £3,280.
Ofgem price cap falling will be ‘deeply concerning’ for many households
Ofgem CEO 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 last 18 months may be starting to ease. If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”
“However, prices are unlikely to fall back to the level we saw before the energy crisis. Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain.”
Ofgem advised that support be continued in some form
“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to. We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”
The projected rise in household bills in April has been met with heavy criticism
Consumer expert Martin Lewis described the rise as a “national act of harm” and suggested that the projected 20% may be removed to encourage competitiveness.
Some asking me "are we going to see fixed rate tariffs return". I think yes, possibly even in next few weeks BUT I suspect they're waiting to see if govt will get rid of the planned April 20% rise first, as that would affect fixes competitiveness.
— Martin Lewis (@MartinSLewis) February 27, 2023
Shadow climate and net zero secretary Ed Miliband decried the announcement as ‘staggering’ given recent reports of record profits by energy companies such as Shell, who reported their highest profits in the company’s 115-year history.
It is staggering that Rishi Sunak plans to allow the energy price cap to rise April
All the while, the oil and gas giants rake in the windfalls of war.
Labour would use a proper windfall tax to stop prices going up in April.
https://t.co/KeDf4OBB3g— Ed Miliband (@Ed_Miliband) February 27, 2023
Sustainable housing stock- such as retrofitting- must become a priority
Cara Jenkinson, cities manager at climate solutions charity Ashden, said:
“This will be a significant hit on households already pressured by the cost-of-living crisis which could have been reduced by a comprehensive retrofit programme, supported by skilled installers. There is no time to lose in terms of launching a comprehensive retrofit programme now, accompanied by a high priority mission to boost retrofit skills, to reduce our dependence on gas, and further price disruptions.”
