Millions of households will see big savings on winter energy bills
Ofgem has recommended that the price cap on household energy bills be kept in place beyond this year as the regulator said it would slash the cap from October 1.
Around 15 million households on default energy tariffs and prepayment meters will benefit from the changes, saving around £84 for default and £95 for prepayment customers
The cap has been set at £1,042 per year for an average households and will be in place for six months until Ofgem reviews it again. It is the lowest the price cap has been.
Ofgem had been tasked with recommending to the Government if the price cap should be kept in place past 2020 based on how competitive the energy market was. The regulator said on Friday that the price cap should stay in place next year.
Ofgem chief executive Jonathan Brearley said: “Millions of households, many of whom face financial hardship due to the Covid-19 crisis, will see big savings on their energy bills this winter when the level of the cap is reduced.
“They can also reduce their energy bills further by shopping around for a better deal. Ofgem will continue to protect consumers in the difficult months ahead as we work with industry and government to build a greener, fairer energy market.”
Richard Neudegg, head of regulation at Uswitch.com, said: “This £84 average fall reduces the default energy price cap to £1,042 for those on standard tariffs - the lowest level it has been since it was introduced in January 2019. For those with prepayment meters, the average fall is £95.
“Wholesale energy prices plunged earlier this year following COVID-19 lockdown measures, and this passes some of that reduction onto the energy bills of millions of households who are on Standard Variable Tariffs.
“There is a £232 difference between the new October level of the price cap and the cheapest fixed deal on the market now, so there is still a lot of money to be saved by moving off a default tariff.
“With Ofgem already saying that the cap may need to rise in April if wholesale trends continue, locking in a 12-month fixed deal is looking like an even smarter choice for consumers.
“Many people will be relieved to see their energy prices fall as temperatures start to drop, and this change will take some of the sting out of expensive winter bills.
“However, savvier consumers will note that a change in October represents a seven month lag since the huge plunge in wholesale prices at the start of the lockdown - an unavoidable fallout of the price cap system.
“This summer has seen energy deals at their cheapest since 2018 and millions are already benefiting from the lower wholesale prices.
“This price cap cut is effectively money off what are the most expensive tariffs in the market. Customers can choose to stay on their energy deal and wait until October to see the cut, or they can reap the benefits of these low prices today by switching.
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