Household energy bills to fall after price cap lowered

Typical home will save £129 a year but is a fixed deal better?

- JOSIE CLARKE

British households can expect a slight respite from soaring energy costs as the energy regulator, Ofgem, announced a 7 per cent reduction in its price cap yesterday, effective from 1 July.

This translates to an average annual saving of £129, or approximately £11 per month, for a typical household. The Ofgem price cap dictates the maximum rate energy suppliers can charge customers per unit of energy used, as well as the standing charge.

It applies to consumers in England, Scotland, and Wales and serves as a benchmark for gas and electricity usage for households paying by direct debit. It's important to understand that the cap doesn't limit the total bill, as consumers still pay for their actual energy consumption.

Higher than average usage will result in a higher bill, while lower usage will lead to a lower bill. Energy regulation in Northern Ireland operates under a separate framework.

Why is the price cap falling?

Ofgem said a recent fall in wholesale prices was the main driver of the overall reduction. Industry analysts Cornwall Insight said the fall followed US president Donald Trump’s aggressive tariff plans leading to a significant slump in gas and oil prices.

However, the 7 per cent cut is slightly reduced from a previously predicted 9 per cent drop after easing trade tensions in recent weeks.

Will bills continue to fall now?

Cornwall Insight said it expects the July fall to be followed by a “modest drop” in October and another similar dip in January next year – although these are only predictions, and the wholesale market is heavily susceptible to international politics and tensions.

Do I need to do anything to make the most of these falling prices?