Millions of British households will see their annual energy bills drop by £75 this winter after the country’s energy watchdog told suppliers to reduce bills by 6%, following a drop in wholesale gas and power prices this year.
Ofgem, the energy regulator for England, Wales and Scotland, said in a statement on Wednesday that from 1st October onwards, the default energy price cap will fall from £1,254 to £1,179 for the winter period until March. The reduction was slightly less than the £80 predicted by some analysts.
In April, the cap was raised by more than 10% to 1,254 pounds.
The regulator added that the price cap for around four million pre-payment meter customers will also fall by £25 to £1,217 a year from October 1. Another 11 million households who are on default, or standard variable tariffs, are set to be affected. Such a household, which uses a typical amount of energy and pays the bill by direct debit, should now expect to pay £1,179 a year.
The default tariff price cap was introduced on 1 January 2019 after sustained pressure on the government to prevent energy companies from taking advantage of loyal customers. These are often the most expensive deals in the market – costing families hundreds of pounds more every year.
Matthew Vickers, chief executive at the Energy Ombudsman, added: “This reduction in the price cap is good news for the 11 million UK households on poor-value default tariffs, but shouldn’t discourage people from shopping around for better deals.
The £75 reduction in the default price cap almost entirely reflects a fall in wholesale costs paid by energy suppliers. A combination of low demand during the winter, strong gas supply and relatively healthy storage levels have pushed down these costs, resulting in the reduction of both caps.
Ofgem chief executive Dermot Nolan said: “The price caps require suppliers to pass on any savings to customers when their cost to supply electricity and gas falls.
“We would encourage all customers to shop around to get themselves the best deal possible for their energy,” he added.