Price cap reduction has little effect on energy price as expert expert energy bill to rise
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Price cap reduction has little effect on energy price as expert expert energy bill to rise

Ofgem is expected to reduce the cap on the amount energy suppliers can charge by around £1,000, but analysts predict that bills will still rise by an average of £500. The cap is expected to fall to £3,295 from April 1, according to energy consultancy Cornwall Insight.

The energy price cap sets a maximum price that energy suppliers can charge consumers for each kilowatt hour (kWh) of energy they use. However, customers will pay about 20% more on their bills due to the Government’s additional support in the form of the Energy Price Guarantee (EPG), which only partially protects consumers from paying the full price cap.

The EPG limits the amount that domestic customers pay to 34p per kWh for electricity and 10.3p per kWh for gas, which works out at £2,500 per year for the average household, with the Government picking up the difference between Ofgem’s price cap and the EPG.

This support is set to become less generous from the beginning of April, resulting in an average bill of £3,000. Additionally, the upcoming end of the £400 energy rebate scheme will further increase the cost of energy for households.

Cornwall Insight predicts that the price cap will fall further to £2,153 in July and then hit £2,161 from October, which is below the price guarantee and will reduce bills for customers and eliminate the Government’s part of the bill. However, even these bills are around double where the price cap had been before the energy crisis.

Dr Craig Lowrey, principal consultant at Cornwall Insight, stated that the fall of the price cap above the increased Energy Price Guarantee level means average annual consumer bills will jump by 20% (£500) and that already-stretched households will see little benefit before July. While prices under the cap remain higher than historic norms, falling wholesale prices and an increase in the EPG could bring back competitive tariffs and provide consumers with the opportunity to take control of their energy bills.


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