Energy bills are poised to decrease for millions of households this spring following the announcement of a new price cap by Ofgem. The price cap is set to drop from £1,758 to £1,641 for the typical household starting April 1, resulting in a 7% reduction of £117. However, the actual amount saved will vary based on individual gas and electricity usage.
The reduction in energy bills is a result of measures introduced by the Government in the autumn Budget last November. Chancellor Rachel Reeves disclosed that energy bills would see a £150 reduction from April by eliminating the Energy Company Obligation and Renewables Obligation.
While this reduction is good news for consumers, it has been partially offset by additional costs such as network maintenance and slight increases in wholesale prices. Ofgem revises its price cap every three months, with the latest rates set to remain in effect until June 30, when they will be reevaluated.
Households are encouraged to explore potential savings by switching to fixed tariff deals. Richard Neudegg, director of regulation at Uswitch.com, emphasized that switching to a competitive fixed tariff could lead to bill savings up to 19%, compared to the 7% reduction under the price cap.
Ofgem’s price cap sets the maximum unit rates and standing charges rather than capping total energy costs. The cap represents an estimate of what the average billpayer may expect to pay based on standard usage. Different rates apply based on location, payment method, and customer type.
Despite the price cap primarily targeting standard variable rate (SVR) tariffs, the announced savings will also extend to fixed-rate tariffs due to the policy cost changes. Customers on fixed-rate tariffs will receive notifications from their energy suppliers regarding tariff adjustments.
The largest component of the price cap is wholesale energy costs, influenced by various factors including network maintenance, operating costs, and profits for energy suppliers. Ofgem is set to announce the July price cap by May 27, 2026, with expectations of stable pricing throughout the year, albeit with a small increase projected for July.
Wholesale prices have experienced slight increases due to geopolitical factors, but the overall outlook for energy prices remains relatively steady for 2026. Dr. Craig Lowrey, Principal Consultant at Cornwall Insight, highlighted the importance of ongoing savings and investments in network infrastructure for a secure and resilient energy system.