Ofgem energy price cap news: Energy bills to fall as Martin Lewis reveals cheapest tariffs

Rachel Fletcher, Director of Economics and Regulation at Octopus Energy, comments:

“It’s good to see Ofgem extend the ban on teaser tariffs, but it needs to end them once and for all. A permanent ban would force suppliers to compete by innovating and driving lower costs – rather than lazily relying on “tease and squeeze” tactics, designed to lure customers in on temporary cut price deals.

“A permanent ban on rip-off tariffs will prevent a return to the wild west energy market – which bamboozled customers and cost them billions in bailing out failed suppliers.”

The fall reflects drops in wholesale energy prices – the amount energy firms pay for gas and electricity before supplying it to households.

The latest cap will see prices fall to their lowest level since Russia’s invasion of Ukraine in February 2022, which caused a further spike in an already turbulent wholesale energy market, driving up costs for suppliers and ultimately customers.

Market volatility led to the cap reaching a staggering £4,279 in January last year, although customers were partly shielded from this by the Government’s Energy Price Guarantee, which limited the average bill to £2,500.

Analysts Cornwall Insight said the lower cap suggested that the UK has, for now, weathered the storm of Red Sea tensions, securing a steady supply of LNG (liquefied natural gas) through the Atlantic.

Good availability of supply in Europe and Asia, in part due to mild weather, has also contributed to the drop in prices.

The typical household energy bill will fall to its lowest level for two years from April but will still remain well above pre-pandemic levels.

What can households expect over the coming months, and are years of exorbitant energy bills finally coming to an end?

Read the full story here…

Rishi Sunak has said the public are “feeling that the economy has turned the corner” and “things are getting better”.

Taking questions after a speech at the Welsh Conservative conference in Llandudno on Friday, the Prime Minister said: “There is a palpable sense out there, regardless of what Keir Starmer might want to say because he’s always keen to talk down Britain, I can tell actually on the ground people are, since the beginning of this year, feeling that the economy has turned the corner.

“They do see those green shoots. They can see that things are getting better.

“Inflation has been more than halved, mortgage rates starting to come down, wages have been rising for six, seven months in a row now.

“We just saw today … energy bills significantly down. Consumer confidence, business confidence, again, survey out yesterday, highest it’s been in years. Businesses like yours feeling better about the future.

“And that is why it is so important that we stick to our plan.”

Household energy bills are set to fall to their lowest point in two years, with Ofgem announcing it will lower its price cap by 12.3 per cent.

The regulator’s new price cap, which will come into effect in April, will see the average household gas and electricity bill fall from the current £1,928 in England, Scotland and Wales to £1,690 – a drop of around £20 a month, or £238 a year.

Ofgem said the drop would see energy prices reach their lowest level since Russia’s invasion of Ukraine in February 2022, which caused a spike in an already turbulent wholesale energy market, driving up costs for suppliers and customers.

Read the full story here…

The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them for each unit of power.

The amount you pay will depend on actual household usage as well as meter and payment type.

In addition, Ofgem will redefine its annual typical usage definition for future prices, to account for people that are using less energy.

Responding to the news that the price at which the average annual energy bill will be capped has fallen from £1,928 to £1,690, Mike Childs, head of policy at Friends of the Earth, said:

“When energy prices have been so obscenely inflated for such a long time, this announcement might seem like a good thing. But new analysis out today finds there’s a staggering 9.6 million households living in cold, health-threatening, heat-leaking homes which they can’t properly afford to heat given they’re on low incomes, as well as the high cost of food and housing. It’s going to take more than a minor retreat in energy prices to resolve the country’s deeply entrenched cold homes problem.

“Cold homes are also a huge blow to the UK economy through costs to the NHS, days taken off work sick from illnesses associated with cold homes, and reduced educational attainment. There is an urgent need for a bold plan to upgrade the UK’s heat-leaking homes. This would save households hundreds of pounds each year on their bills and significantly reduce the societal costs of cold homes – estimated to be in the tens of billions of pounds annually by the Michael Marmot Institute of Health Equity. Neither of the main political parties have yet developed a plan that comes anywhere close to tackling the scourge of cold homes.”

– Stays 3% LESS than every Cap (so moves with Price Cap)

– £50 dual-fuel exit fees

Money saving expert said E.on Next would be worth considering as it’s a variable tariff offering a fixed discount off the Price Cap for one year.

It stays £50 below the price cap.

British Gas Price Promise to new and existing customers

– 12% LESS (but guaranteed to be below the April Price Cap)

– £150 dual-fuel exit fees

The money-saving expert explained it’s a complicated tariff but could be worthwile as it is guaranteed to be at least £1 per fuel under April’s Price Cap.

Deals deemed ‘borderline’

Outfox the Market’s next pledge deal for new and existing customers

Octopus Energy loyal Octopus 12M Fixed Feb 2024 v1- for existing customers

Ovo Energy’s 1 Year Fixed & Boiler Cover- for new and existing customers with £150 dual-fee exit.

Money Saving Expert are advising households to consider a fixed deal if it is priced 17% less than the current January Price cap.

E.On Next’s Pledge tarriff promises to remain 3% lower than the price cap – so when the cap drops in April, so will the tariff, making it a worthwile option.

If consumers value certaintly over their monthly outgoings, British Gas Price Promise is around 12% cheaper than the current January cap and will drop to £1,688 a year for a typical dual-fuel user and remains fixed until June 2025.

Outfox the Market has a 12-month fix that’s 14% below the current Price Cap, and allows you to switch if a better deal comes along without paying an exit fee.

Octopus customers might wish to consider the Octopus Tracker tariff which rates change day-to-day according to wholesale costs, making it cheaper than the Price Cap in recent months.

The energy price cap is calculated based on wholesale energy prices. This is the amount energy providers pay for gas and electricity before supplying it to households – and it has begun to fall steadily in recent months.

Energy consultancy firm Cornwall Insight has gained a reputation in recent years for near-accurate predictions of coming energy price cap changes. They consider a range of factors, including wholesale energy prices and Ofgem’s own approach, to make their forecasts.

While the lowering of the energy price cap will come as welcome news to those struggling with their bills, it is still nearly £500 higher than when the cap was introduced in January 2019.