UK energy bills to fall after regulator cuts cap

Most British households will see lower energy bills from April, energy regulator Ofgem said on Wednesday after cutting its price cap by 7% under government measures to ease costs.

The move follows plans set out in last year’s budget to shift some renewable energy costs to general taxation and scrap a scheme requiring suppliers to fund measures such as insulation for low-income households.

“The main driver of today’s reduction is the change to policy costs announced by the Chancellor in the budget,” Tim Jarvis, Director General, Markets, at Ofgem said.

The new cap of 1,641 pounds ($2,218.96) a year for average electricity and gas use is 117 pounds lower than the level set for January to March.

The government said last year it would shift 75% of the cost of the Renewables Obligation, which funds renewable power generation, from consumer bills to general taxation from April.

It also said it would scrap a scheme requiring energy companies to fund measures such as insulation and new heating systems for low-income households.

The two measures would remove around 150 pounds a year from average household bills, it added.

However, soaring network costs have offset some of those savings.

Wholesale gas and power prices are a major part of the formula Ofgem uses to calculate the price cap and these fell over the past few months, but network costs are becoming a larger part of the bill as the network is upgraded.

Network costs rose by 66 pounds compared with the last price cap period as levies associated with a 24 billion pound upgrade to the country’s energy transmission system started to be added.

ENERGY COSTS STILL HIGH

Despite the fall, consumer groups said energy costs remained unmanageable for many and urged more support for those struggling.

“Bills remain hundreds of pounds above pre-crisis levels and for millions of families in cold, damp homes this will not feel like the cost of living crisis is over,” said Simon Francis, coordinator of the End Fuel Poverty Coalition.

Even at the new level the price cap remains around 30% higher than in the winter of 2021/22, before Russia’s invasion of Ukraine led to a spike in global energy prices.

The government said April’s price fall shows it is acting to lower costs for households.

“I know there is more to do – and my government is pulling every lever to bear down on the cost of living,” Prime Minister Kier Starmer said in a statement.

The price cap on standard tariffs was introduced in 2019 and now covers about two-thirds of households.

($1=0.7395 pounds)