Energy bills are poised to decrease for many households this spring following the announcement of a new price cap by Ofgem. The price cap is set to drop from £1,758 to £1,641 for the average household starting April 1, representing a 7% reduction or £117. The actual savings will vary based on individual energy consumption levels.
For every £100 spent on energy currently, households can expect to save around £7 starting in April. This reduction is attributed to measures introduced in the Government’s autumn Budget last November. Chancellor Rachel Reeves disclosed that energy bills would be slashed by £150 from April by eliminating the Energy Company Obligation and Renewables Obligation.
Despite these savings, additional costs such as network maintenance and slight increases in wholesale prices have partially offset the benefits. Ofgem revises its price cap every three months, with the new rates remaining effective until June 30 before being reviewed again.
Households are advised that switching to a fixed tariff deal could lead to further savings. Director of regulation at Uswitch.com, Richard Neudegg, emphasized that switching to a cheap fixed tariff could result in bills up to 19% lower than current standard rates, surpassing the 7% reduction from sticking with the price cap.
Ofgem’s Director General, Markets, Tim Jarvis, highlighted that today’s reduction is primarily driven by the policy cost adjustments announced in the budget. Ofgem’s focus remains on reducing controllable costs and facilitating investments for a more sustainable energy system in the long term.
Notably, the Ofgem price cap does not cap the total energy costs but establishes maximum unit rates and standing charges. The average unit rates for gas and electricity are set to change, with variations based on region and customer type. The price cap represents an estimate of what the typical billpayer might spend based on average energy consumption.
Wholesale energy costs, which constitute a significant portion of the price cap, have been influenced by geopolitical factors. Cornwall Insight forecasts a relatively stable price cap throughout 2026, with a potential small increase in energy bills in July. Dr. Craig Lowrey from Cornwall Insight emphasized the importance of maintaining bill reductions over time amid ongoing network and infrastructure upgrades.
Households on fixed rate tariffs will also benefit from the announced savings due to the policy cost adjustments. Ofgem will reveal its July price cap by May 27, 2026, with a continued focus on balancing costs and investments in the energy sector.