Energy Regulator Announces Significant Price Reduction for Households
The price most households pay for energy will fall by 7 percent starting April 1, according to a major announcement from Ofgem. This reduction is primarily driven by the government's promised £150 cut to the average bill, which was confirmed by Chancellor Rachel Reeves in November.
Details of the Price Cap Adjustment
Ofgem's price cap will drop from the current £1,758 to £1,641 for a typical household using both electricity and gas. This represents a reduction of approximately £10 per month for the average consumer. The government has explicitly instructed energy firms to pass these savings on in full to all customers from April 1, including those who are already signed up to fixed tariffs.
However, the actual cut to individual bills will depend on several factors, including the size and type of household, as well as overall energy consumption patterns. Part of the government's planned average £150 cut has been offset by rising costs associated with upgrading electricity and gas networks, resulting in Ofgem's overall reduction to the price cap being adjusted to £117.
Government Policy and Industry Response
Chancellor Rachel Reeves announced the £150 reduction by scrapping the Energy Company Obligation (Eco) scheme, which was originally introduced by the Conservative government. Tim Jarvis, director general of markets at Ofgem, stated: "Today's announcement will be welcome news for many households. Wholesale energy prices have fallen in recent months, and we're investing in our network to safeguard the future energy system."
Jarvis emphasized that the main driver of this reduction is the change to policy costs announced by the Chancellor in the budget. He added: "Our focus at Ofgem remains on bearing down on the costs within our control, and unlocking the investment needed to support the transition to a more stable energy system over the longer term. We're also seeing encouraging signs of greater engagement and competition, with switching increasing by almost 20 percent year on year."
Structural Changes to Billing
Ofgem has also confirmed a significant decision to move the costs of the government's separate Warm Home Discount from standing charges to the hourly unit rate of gas and electricity. Standing charges are the flat rate households pay each day to have energy supplied to their homes. As a result of this change, standing charges will drop by an average of £13, or 4p per day, for customers using both electricity and gas.
Concerns from Consumer Advocates
Despite the positive news, consumer advocacy groups have raised concerns about the ongoing affordability of energy for many households. Citizens Advice chief executive Dame Clare Moriarty commented: "A fall in energy prices is welcome but for many people bills remain stubbornly high. For millions of households this has stopped being a temporary hardship and become an ongoing threat to their financial stability."
Moriarty highlighted the growing divide between those who can and cannot keep their homes warm and safe, calling for urgent action. She specifically noted that too many people, particularly those with disabilities, families with children, and renters, remain trapped in cold, damp homes they cannot afford to heat.
Industry Perspective
Dhara Vyas, the chief executive of Energy UK, which represents energy firms, said: "Today's reduction in the energy price cap is a welcome first step by the Government toward providing meaningful support for households, helping make it more affordable for people to keep their homes safe, comfortable, and warm."
Vyas cautioned that while everyone should see savings on their bills from April 1, the effect of moving some policy costs off the gas and electricity unit price will vary. She explained that the actual impact depends on each household's energy use, the type of building they live in, how many people live in the property, and even how the bill is paid.
The announcement comes amid ongoing challenges in the energy market, with regulators and policymakers working to balance affordability for consumers with the need for long-term investment in energy infrastructure and the transition to more sustainable energy systems.
