Credit, Collections & Insolvency News
Energy regulator Ofgem has announced a 7% (or £117) reduction of the energy price cap for the period covering 1st April to 30th June 2026. This change amounts to a reduction of around £10 a month for the average household using both electricity and gas.
The price cap refers to the default tariff applied when a customer is not on a fixed-rate tariff. It sets a maximum rate per unit and a standing charge that can be billed to customers for their energy use.
For an average household paying by Direct Debit for gas and electricity, the overall bill will be £1,641 per year. Recent government budget interventions relating to policy costs are the main cause of this reduction.
The new level marks a significant reduction in the cap level and is more than £200 lower than a year ago. This reflects the government’s decision to take £150 in policy costs off energy bills.
The regulator says the recent reduction in energy prices is welcome but that consumers remain exposed to the volatility that increased bills during the crisis, as wholesale gas costs still make up the largest part of the bill. Investing in our networks as part of transitioning to a greener, homegrown energy system will help reduce our reliance on volatile international markets in the longer term.
Ofgem is also encouraging customers to shop around and consider whether fixing with their existing supplier or switching could save them money. Last year, customers on a fixed tariff paid around £115 less on average compared to those on the price cap.
Tim Jarvis, Director General, Markets, at Ofgem, said “Today’s announcement will be welcome news for many households. Wholesale energy prices have fallen in recent months, and we’re investing in our network to safeguard the future energy system. The main driver of today’s reduction is the change to policy costs announced by the Chancellor in the budget.
“Our focus at Ofgem remains on bearing down on the costs within our control, and unlocking the investment needed to support the transition to a more stable energy system over the longer term.
“We’re also seeing encouraging signs of greater engagement and competition, with switching increasing by almost 20% year on year. More households are choosing time‑of‑use tariffs that offer cheaper off‑peak rates, and suppliers are offering a wider range of products, including deals with savings at evenings or weekends.
“The price cap protects households from overpaying for energy, but it’s a safety net. Last year, consumers on fixed deals paid around £115 less than the cap on average, so we’d encourage people to speak to their supplier about the options available and consider whether a different tariff or payment method could help bring their bills down further.”
Customers could also save money by changing payment methods from standard credit to Direct Debit or smart prepayment. Currently 8 million customer accounts pay by standard credit but could be making savings of around £131 with one simple switch.
Ofgem has also confirmed that a pilot for lower standing charge tariffs will be starting from this spring to bring greater choice for consumers, particularly those with low energy usage. It will first be offered to eligible customers of EDF, E. ON, Octopus and British Gas.
The regulator urges anyone struggling with their bills gets the help they need from their supplier and encourages customers to reach out for support if needed.
That could include tailored repayment plans, which can help households regain control and avoid falling further behind, or routes to financial assistance and debt advice.
Peter Tutton Director of Policy, Public Affairs, and Research at StepChange, said “Whilst a reduction in the price cap may give people pause for a welcome sigh of relief, the reality is that energy debt and energy bills are still placing significant pressures on households across Britain. People spend huge proportions of their income heating their home and keeping the lights on – as our advisers hear every day that people are struggling to cope with the cost of energy.
“Under the current cap, average bills remain around £500 per year higher than households could expect just a few years ago, and as such we want the Government to build on its recent extension of the Warm Home Discount scheme with an energy social tariff to close the affordability gap for struggling households.
“The energy price cap is the maximum amount energy suppliers can charge you for each unit of energy and standing charge – but it does not mean that your overall cost is strictly capped at £1,641. So, it’s important to keep an eye on your individual usage, as depending on your circumstances, some will pay more than this. If you’re struggling with your energy costs or debt, reach out to your energy supplier to see how they might be able to support you. Free debt advice providers like StepChange are always here to help if you find yourself struggling.”
On the expected energy price cap drop this April, Alastair Douglas, TotallyMoney CEO comments:
“Just because the headlines say that energy prices are coming down, that doesn’t mean you’re getting the best deal. The energy market punishes loyalty, and most households are paying the maximum their supplier is allowed to charge.
“You could save up to £917 per year on your bills just by switching, and changing suppliers is easy, with most taking place in just five working days. All your plugs and pipes stay the same, and nobody needs to visit your home to make it happen.
“If switching, make sure to watch out for early exit fees – because if you’re already tied into a deal, you might be charged if you leave. These can cost around £50 per fuel – so £100 in total. But, if you’re in the last 49 days of your contract, you won’t be charged. And if you’ve not switched for a year, there’s a good chance you’re free to move.”
