Ofgem cuts power price cap by £1,000, but bills will still rise

Ofgem confirmed that the energy price cap will fall from April (Image: Getty)

The cap on how much households pay on electricity and gas bills will be cut by £1,000 from April 1.

Ofgem has today reduced the average amount providers can charge to £3,280, a notable drop from the current £4,279 per year.

Customers who use a lot of energy will still have higher bills, but this reflects typical usage levels.

The regulator said the new cap is a result of recent declines in wholesale energy prices.

Household energy bills are still expected to rise (Image: Getty)

Those most affected by the cost of living crisis may be hoping that this is a light at the end of the tunnel.

But domestic energy bills will still rise by an average of £500 a year despite the reduction.

As the government becomes less generous with support from the beginning of April, bills will increase by approximately 20%.

This is likely to lead to annual power bills of no less than £3,000.

British Gas announced that its 2022 profit had tripled to over £3bn (Image: Getty)

The £3,280 figure indicates how much those on their power providers’ base rate would pay if the Energy Price Guarantee (EPG) were not in place.

When the upcoming end of the scheme, which is paid in six installments of £66 and £67 a month, is factored in, the cost of energy for households will rise further.

Unite general secretary Sharon Graham said Ofgem’s latest moves “do almost nothing” to ease the pressure on people already racked by incoming fuel bills.

She said: ‘This out-of-touch government is clearly preparing to pull the plug on consumer protection and is completely abdicating any responsibility for dealing with runaway speculation by energy companies.

‘Some days ago, Centrica/British Gas announced that its 2022 profit has tripled to more than £3bn.

‘This year, it is planning a £500m share buyback for a windfall payout to its shareholders.

‘The British economy is ruined for workers: different decisions must be made.’

Ofgem chief executive Jonathan Brearley acknowledged this is “deeply concerning” for some households.

“Although wholesale prices have fallen, the price cap has not yet fallen below the expected level of the Energy Price Guarantee,” it said.

‘This means that in the current policy bills will rise again in April.

“But today’s announcement reflects the fundamental change in the cost of wholesale energy for the first time since the gas crisis began.

“While it won’t make an immediate difference to consumers, it is a sign that some of the immense pressure we’ve seen in the energy markets over the past year and a half may be starting to abate.

“If the reduction in wholesale prices that we are currently seeing continues, the signs are positive that the price cap will drop again in the summer, which could drive bills significantly lower.”

Mr Brearley stressed that it is “unlikely” that prices will fall back to what they were before the energy crisis.

He added: “With bills continuing to be so high, there is a case to urgently examine the feasibility of a social tariff for customers in the most vulnerable situations.”

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