Ofgem confirms 7% fall in prices

According to energy regulator Ofgem, energy bills are set to decrease by 7% in July, marking the first decline in a year.

This change means that a household consuming a typical amount of gas and electricity will see their annual bill reduced by £129.

The price cap, adjusted every three months, establishes a maximum charge per unit of energy, impacting 22 million households across England, Scotland, and Wales.

While affordable bills are a positive development, charities warn that many individuals still face difficulties paying bills, with customers collectively owing around £4bn to energy suppliers.

It’s important to note that the price cap does not apply to Northern Ireland, which operates under its own energy regulations.

Tim Jarvis, Ofgem’s director general of markets, stated that the decrease in energy costs is attributed to a drop in the international wholesale gas price.

“Nonetheless, we recognize that prices are still high and many continue to struggle with the energy costs,” he mentioned.

This reduction occurs during the warmest season of the year when energy consumption typically diminishes, but analysts anticipate minimal changes in prices come October.

Although prices are capped quarterly, Ofgem illustrates this impact by referencing the annual expenses for a household that uses a standard amount of gas and electricity.

For this average household, usage is believed to be 11,500 kWh of gas and 2,700 kWh of electricity per year, billed monthly through direct debit.

Following the 7% reduction, the typical annual bill for a dual-fuel customer on direct debit would be £1,720, down from the existing £1,849.

This would reverse the £111 increase introduced under the current cap, which became effective at the beginning of April.

Consumers can estimate their savings by reducing their monthly direct debit by 7%.

However, prices remain higher than a year prior and significantly surpass levels seen at the start of this decade.

The surge in bills over the years has resulted in increasing levels of debt among customers, with nearly £4bn owed to suppliers.

Dame Clare Moriarty, CEO of Citizens Advice, remarked that the new energy price cap announcement offers “cold comfort to those burdened by debt in addition to their monthly expenses.”

“While the government aims to provide more assistance to pensioners this winter, families with children are often the most affected by energy costs,” she added.

“It is crucial to provide targeted support for energy bills and to invest in energy efficiency upgrades for 5 million homes.”

Ofgem highlighted that households looking to lower their bills should consider switching to fixed-rate deals, though those in debt might face restrictions on switching.

The price cap news comes just two days after Prime Minister Sir Keir Starmer hinted at a partial reversal of cuts to winter fuel payments.

Last year, over 10 million pensioners were impacted when these payments, up to £300, became means-tested.

However, Sir Keir announced that the government seeks to expand eligibility for pensioners once more.

Details about how many will regain access to the payments, the methods involved, or the timing of changes remain unclear.