An update is expected this week
An update is due on bills(Image: brizmaker via Getty Images)
Households are set for good news on energy bills this week, with an exact date set for them to fall. Latest forecasts indicate Ofgem will slash the energy price cap by £117 to £1,641 annually for a typical dual fuel household from April 1 when it reveals its decision on Wednesday.
The energy price cap establishes a maximum rate that suppliers can charge customers in England, Scotland and Wales for each unit of gas and electricity they consume. It also establishes a maximum daily standing charge – the expense of having your property connected to the grid.
The headline price cap figure issued by Ofgem shows what a household using gas and electricity, and paying by direct debit, can anticipate paying if their energy usage is typical. It is crucial to understand that it does not cap a home’s total bills because people still pay for the amount of energy they use – so if it is above the average they will pay more, and if it is below they will pay less. Energy is regulated separately in Northern Ireland.
What’s changing with my energy bill this time?
The forthcoming price cap, which will come into force from April 1, will be the first to reflect Chancellor Rachel Reeves‘ pledge last November that £150 would be cut from the average household bill. She plans to achieve this by transferring 75% of the Renewables Obligation (RO) costs from household energy bills to general taxation, and abolishing the Energy Company Obligation (Eco) scheme.
This scheme was introduced by the Tories in government, funded by bills and aimed at combating fuel poverty by improving housing conditions, but it has been plagued with delivery issues. The main impact on customer bills will be a reduction in households’ electricity unit rates, with an anticipated decrease of around 3.37p per kilowatt hour (kWh) from the previous quarter.
Why won’t I see a £150 discount on my bill?
The discount will be applied through a lower unit rate rather than a one-off sum. It’s also important to note that the £150 figure is an average, and amounts will differ depending on the size and type of household and their energy usage.
Furthermore, industry analysts Cornwall Insight have stated that the changes are likely to reduce the cap by about £145 a year once VAT and other pricing allowances are considered. They added that increases in costs associated with the operation and maintenance of gas and electricity networks, which are paid for from customer bills, have offset some of these savings.
Do I need to do anything to get an energy bill cut?
Households should watch out for correspondence from their energy suppliers following the price reduction announcement, especially regarding the unit rates they’re charged for gas and electricity. This detail will prove crucial for those contemplating moving away from the price cap to a more affordable fixed tariff, and those seeking new fixed arrangements, as comparing unit prices is essential to securing a good deal.
Is now the right moment to switch?
It’s always worthwhile exploring fixed deals, bearing in mind any contractual obligations that might trigger exit charges. As a general rule, Which? suggests seeking deals below the price cap (this is where comparing gas and electricity unit rates matters, rather than focusing on headline figures), lasting no more than 12 months and without substantial exit fees.
Nevertheless, the End Fuel Poverty Coalition noted that some fixed tariffs will incorporate announced reductions from February 25, while others will not. It cautioned that this could make switching and fixing – which is already confusing – “even more difficult to gauge”.
It stated households might prefer to wait until Wednesday’s announcement settles before committing to a fixed-term deal or changing supplier.
Will energy prices continue falling, or should we anticipate increases ahead?
Cornwall Insight presently anticipates the price cap will stay fairly stable during 2026, with a modest decrease predicted in July. Nevertheless, the firm acknowledged these forecasts could alter as wholesale markets fluctuate and possible policy cost declarations emerge.