Ofgem, Britain’s energy regulator, is set to announce an unprecedented cut in gas and electricity prices for homes. This change will make a big difference to millions of households starting this July. While this change is much needed, it will only benefit approximately 22 million households across England, Scotland and Wales. We have assumed typical dual-fuel customers paying by direct debit will see their annual bills reduce by over £100.
The price cap is meant to limit the most that suppliers can charge for gas and electricity, their two main products. Perhaps most importantly, it serves as a frontline defense for consumers. It is capped every three months and made headlines when it was as high as £4,000 in January 2023—its peak. This introduced a downward trend starting from July 2023, when the cap dropped under £2,000. Since then, it has held steady well beneath this cap.
A typical household uses the equivalent of 11,500 kWh of gas and 2,700 kWh of electric annually. With the planned change coming soon, they should prepare for their yearly bill to increase to an average of £1,720. That would be a decrease from the present mean of £1,849. Even with this drop in prices, they are still higher than last year at this time. They are still way above where we started the decade.
This historic stretch of inflated energy prices has presented significant impacts on consumers. Many households now face substantial energy debt. Reports indicate that nearly £4 billion is owed to suppliers as a result of escalating bills in recent years.
Matthew Cole, chief executive of the Fuel Bank Foundation, highlights the ongoing financial strain many face:
“The cost of living is still incredibly high, and many people, especially those who are vulnerable or have low incomes, are dealing with energy debt built up over the last few years of sky-high bills.”
The price cap doesn’t extend to Northern Ireland, which has its own energy market. Changes in Great Britain are already proving a significant financial reprieve to cash-strapped households.
