- Ofgem has reduced the British domestic energy price cap by 12.3 per cent to its lowest level.
- Ofgem said that while the drop is good news for consumers, there are still challenges in the energy market.
The Office of Gas and Electricity Markets (Ofgem) has reduced the British domestic energy price cap by 12.3 per cent, its lowest level over two years.
The drop, prompted by lower wholesale energy prices, will provide some respite for households struggling to contend with a cost-of-living crisis while also helping to curb inflation.
Ofgem’s new cap of 1,690 pounds ($2,139.37) a year for average use of electricity and gas is down 238 pounds from the previous cap of 1,928 pounds.
Ofgem said that while the drop is good news for consumers, there are still challenges in the energy market, with a record 3.1 billion pounds in unpaid bills.
The regulator has allowed suppliers to include within the cap a temporary charge equivalent to 28 pounds a year to help them cover consumers’ bad debt.
Campaign group National Energy Action said that 6 million households would remain in fuel poverty despite the reduced price cap. Fuel poverty is defined as being unable to afford to heat homes for temperatures needed to stay warm and healthy.
Also, Ofgem CEO Jonathan Brearley said, “But in the longer term, we need to think about what more can be done for those who simply cannot afford to pay their energy bills even as prices fall.”
About 29 million customers are on standard rate tariffs covered by the price cap introduced in 2019 to protect consumers. The cap is set using factors such as network fees, social and environmental costs, and wholesale energy prices. It is updated every quarter to reflect changes to those costs.