Households are in for some good news as Ofgem plans to lower the energy price cap to just over £2,000 per year starting this July, potentially saving customers nearly £450 on their energy bills.
Industry experts at Cornwall Insight have predicted that the price cap will decrease by £446, settling at £2,054 annually. This reduction is primarily attributed to the falling wholesale energy prices.
However, it’s important to note that campaigners are cautioning against premature celebrations, stating that energy bills will likely remain higher than pre-2020 levels until at least 2030.
The price cap set by Ofgem has witnessed significant fluctuations, rising from £1,162 per year for an average household in August 2021 to its current level of £3,280. In January this year, energy costs briefly soared to £4,279 due to the pandemic and Russia’s conflict in Ukraine, which drove up wholesale prices.
However, customers were partly shielded from the most recent increase through the government’s Energy Price Guarantee, capping annual energy costs at £2,500 for the average household, which is lower than Ofgem’s price cap.
It’s worth noting that Ofgem’s price cap does not establish a maximum amount that households will pay for their energy. Instead, it limits the charges that energy providers can impose on their customers per unit of gas or electricity, meaning that those who consume more energy will pay more.
