UK power bills to fall after Ofgem cuts price cap by 7%

LONDON, Aug 25 (Reuters) – Millions of British households will see cheaper energy bills from October after Britain’s energy markets regulator Ofgem cut its price cap again to reflect a further drop in wholesale prices. of energy and gas.

Ofgem on Friday cut its price ceiling on household energy bills by about 7% from October 1 to £1,923 ($2,418.56) a year for a typical dual-fuel home.

The drop will save households an average of £151 compared to the previous quarter, Ofgem said.

The drop also represents the lowest level since October 2021 and reflects further declines in wholesale power prices as the market stabilizes and providers return to a healthier financial position after four years of losses, it added.

Wholesale energy and gas prices hit record levels in Britain and Europe last year after the Russian invasion of Ukraine cut off gas supplies.

Although wholesale gas and power prices have fallen by around 85% and 80% respectively from the all-time highs in the first quarter of last year, there is still price volatility and the price cap remains well above average ahead of the outbreak of the energy crisis.

“It is good news that the price cap continues to fall. However, we know that people are struggling with the broader challenges of cost of living and I cannot offer any certainty that things will improve this winter,” said the Ofgem CEO Jonathan Brearley.

Around 29 million customers have standard rates protected by the price cap, which was introduced in 2019 to protect consumers.

“As we head into the colder winter months, uncertainty remains around the outlook with many expecting a mild winter. Current estimates are that prices could rise again in January and will remain at these higher levels. for the foreseeable future,” said Simon Virley, vice president and head of energy and natural resources at KPMG.

British Prime Minister Rishi Sunak told reporters the government was working to reduce inflation and further ease the cost of living burden on households.

British inflation has been slow to fall since hitting a 41-year high of 11.1% last year, and at 6.8% in July was the highest of any major economy.

Ofgem sets the limit using a formula that includes provider network costs and environmental and social taxes, with wholesale energy prices being the most important factor. Revise the limit each quarter to reflect movements in the wholesale market.

He said that while the cap has helped shield households from the full scope of wholesale price surges over the past two years, it is a “blunt tool” and it is important to look at alternative mechanisms to assess whether they would work better in the current volatile price environment.

Ultimately, however, any decision on whether a price cap reform is necessary is up to the government, Ofgem officials told reporters.

The regulator also said it has introduced measures to reduce costs for customers on prepaid meters and hopes to have a code of conduct on the behavior of energy providers by winter.

($1 = 0.7951 pounds)

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