In a much-needed boost for millions of families, Britain's energy regulator Ofgem is poised to announce a substantial reduction in its flagship price cap next week. The move is set to bring tangible relief to households who have been grappling with historically high energy costs.
The new cap, which dictates the maximum amount suppliers can charge per unit of energy, is expected to fall to approximately £1,635 a year for a typical dual-fuel household. This represents a significant decrease of around £123 from the current level of £1,758, according to leading energy consultancy Cornwall Insight.
What Does This Mean for Your Wallet?
This anticipated drop translates to lower direct debit and standing charge payments for the vast majority of UK homes from April 1st. The reduction is primarily driven by a sharp fall in global wholesale gas prices, which have stabilised after the extreme volatility triggered by the war in Ukraine.
Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, commented: "While the drop in the price cap is positive, it's crucial to understand that bills will remain well above pre-crisis levels. Households are still facing an enormous burden, and this is merely a step down from a towering peak."
A Cautious Outlook for 2024
Looking ahead, forecasts suggest the price cap will see further adjustments throughout the year. Predictions indicate a slight rise in the summer quarter before falling again towards the end of 2024, potentially settling around £1,465 by the year's end.
This ongoing fluctuation underscores the continued fragility of the global energy market. While the situation is improving, experts warn that the era of exceptionally cheap energy is likely over for the foreseeable future.
The government's Energy Price Guarantee, which was introduced to shield consumers from the worst of the price spikes, is currently not in effect as the Ofgem cap has fallen below its threshold.
Ofgem is scheduled to make the official announcement on the new price cap level, which will cover the period from April to June, this coming Friday.
