Annual energy bills will drop by £117 for millions of households in Great Britain from April, after Chancellor Rachel Reeves' plan to cut £150 a year was partly offset by rising network costs. The energy regulator Ofgem announced on Wednesday that its quarterly price cap will fall by 7% to £1,641 for the average dual-fuel direct debit customer, down from £1,758 in the current period.
The reduction follows the November Budget, in which Reeves shifted some green levies from household bills to general taxation and scrapped a billpayer-funded energy efficiency scheme. However, for most households on variable tariffs, the savings will be smaller than the promised £150, as the cuts were partially offset by higher costs for maintaining and upgrading the UK's energy networks. Network charges increased by £66 from the previous cap, Ofgem said.
Households on fixed-rate deals, about 40% of the market, will see the full benefit of the government's intervention without the impact of rising grid costs, meaning larger savings. Without government action, bills would have risen for a fourth consecutive quarter despite falling wholesale prices.
Despite the cap reduction, domestic energy costs remain about a third higher than before Russia's invasion of Ukraine. Energy debts in Britain have reached record levels, partly due to inflated gas prices from imports and the cost of the energy transition. Prime Minister Keir Starmer said the government is 'pulling every lever' to reduce the cost of living.
Ofgem's Tim Jarvis noted that the main driver of the reduction was the change in policy costs announced by the chancellor. However, charity leaders warned that bills remain unaffordable for many. Peter Smith of National Energy Action said the new level is 'still far from affordable', while Clare Moriarty of Citizens Advice called it 'an ongoing threat to financial stability'.
The cost of electricity in the UK, among the highest in the developed world, has become a political issue, with opposition parties pledging to cut costs by scrapping net-zero policies. Craig Lowrey of Cornwall Energy cautioned that the energy transition 'will not be cost-free' and urged long-term progress.
