Ofgem’s energy price cap will drop below the government’s guarantee in July for the first time since it was introduced, marking the first fall in prices for households since mid-2021.
Suppliers will be limited to charging £2,074 on an annual basis from 1 July, based on the average four-bedroom home, through caps on the price of each unit of gas and electricity.
Ofgem’s current cap is £3,280 and has run since April, though customer bills have been subsidised to an average of £2,500 through the government’s energy price guarantee, meaning a £426 fall will mark the first for customers since early 2021.
“It is encouraging to see signs that the market is stabilising and prices are moving in the right direction,” Ofgem boss Jonathan Brearley said.
“People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.”
However, Brearley warned prices are unlikely to return to pre-energy crisis levels in the “medium term”.
Though wholesale gas prices, which determine electricity prices, have almost returned to pre-energy crisis levels, sitting at a near two-year low of £0.64 per British thermal unit on Thursday morning, the new cap will be £936 higher than summer 2021.
Analysts blame market volatility for high costs, which the UK is particularly exposed to due to a reliance on imports, though factors such as supporting customers of collapsed suppliers also weigh in.
“Bills remain much higher than they were 18 months ago and many customers will continue to struggle,” industry body Energy UK commented.
“We […] need to press ahead with expanding our own sources of domestic, clean power and make more of our homes energy efficient, as these will help bring down energy costs permanently for all customers.”