Energy regulator Ofgem has today announced its quarterly update to the energy price cap for the period 1 April – 30 June 2023.
From 1 April the energy price cap will be set at an annual level of £3,280 for a dual fuel household paying by direct debit based on typical consumption, a reduction of almost £1,000 from the current level, of £4,279 which reflects recent falls in wholesale energy prices.
This reduction in the price cap level reflects a significant reduction in the cost of buying and providing energy for customers. If it continues, it will mean that by the summer, prices paid by consumers will drop for the first time since the global gas crisis took hold more than 18 months ago.
The energy price cap was introduced by the government and has been in place since January 2019, and Ofgem is required to regularly review the level at which it is set.
It ensures that an energy supplier can recoup its efficient costs while making sure customers do not pay a higher amount for their energy than they should. The price cap, as set out in law, does this by setting a maximum that suppliers can charge per unit of energy.
However trhe typical annual household bill is set to rise from £2,100 to £3,000 in April because government help – known as the Energy Price Guarantee (EPG) – will become less generous and a £400 winter discount on all bills ends.
Ofgem CEO Jonathan Brearley said:
“Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means, that on current policy, bills will rise again in April. I know that, for many households this news will be deeply concerning.”
“However, today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease. If the reduction in wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”
“However, prices are unlikely to fall back to the level we saw before the energy crisis. Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain.”
“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to. We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”
Responding to Ofgem’s energy price cap announcement, Labour’s Shadow Climate and Net Zero Secretary Ed Miliband says:
“In a few weeks’ time, Rishi Sunak’s Government plans to allow the energy price guarantee to rise to £3,000.
“All the while, the oil and gas giants rake in the windfalls of war and Rishi Sunak’s Conservatives refuse to implement a proper windfall tax that would make them pay their fair share.
“Labour would use a proper windfall tax to stop prices going up in April.
“Rishi Sunak is too weak to stand up for the British people. Only Labour is on your side – with a mission to tackle the cost of living crisis now, and a long-term plan to cut bills for good by making Britain a clean energy superpower.”
