Ofgem announces energy price cap fall

Energy regulator Ofgem has announced its quarterly update to the energy price cap for the period 1st July – 30th September 2023.

From 1st July, the energy price cap will be set at an annual level of £2,074 for a dual fuel household paying by direct debit based on typical consumption, which reflects recent falls in wholesale energy prices.

The new price cap represents both a reduction in last quarter’s cap, and also a reduction in how much customers will pay on their bills. Since October 2022, consumers have been supported by the Government’s Energy Price Guarantee, which caps the typical bill at £2,500.

The update means that, for the first time since the global gas crisis took hold more than 18 months ago, prices are falling for customers on default tariffs. The savings can now be passed on to customers more quickly, thanks to Ofgem now updating the price cap quarterly rather than every six months.

At its peak, the price cap reached £4,279 and, whilst today’s level is lower than last quarter, it is still above the levels it was before the energy crisis took hold, meaning many households could still struggle to pay bills.

While the price cap has dropped from its winter peak, it remains well above the pre-2021 average, and many people will still find such high bills difficult to pay. Earlier this year, Ofgem CEO Jonathan Brearley highlighted that many households continue to struggle to afford their energy bill – therefore more focus will be needed for government, the regulator and the industry to support the most vulnerable groups this winter.

Ofgem CEO Jonathan Brearley said “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction. People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.”

“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.”

“In the medium term, we’re unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups. In particular, we will continue to work with government to look at all options.”

Joanna Elson CBE, Chief Executive at the Money Advice Trust said “Today’s price cap announcement offers some relief to households – but for many, the damage from unaffordable energy bills is already done.  Energy is still significantly more expensive than when this crisis started, and more support is going to be needed.”

“We need permanent solutions to this problem – including a social tariff for low income households, and a wider Essentials Guarantee to ensure Universal Credit always covers essential costs.”

“It’s also vital that people can access the advice they need.  I would urge anyone who is worried about their energy bills to seek free, independent debt advice from a service like National Debtline. Our expert advisers are there to help and talk you through your options.”

Alastair Douglas CEO of TotallyMoney said “For some, it might seem that they’re topping up the meter less often, or that their bills are lower. However, it’s also likely that with longer days and warmer weather, they’re using less energy.”

“So while the Energy Price Cap coming down is good news, it remains around £1,000 higher than it was prior to the pandemic — and when autumn arrives and the government support is gone, we’ll once again be worrying about how much keeping warm is costs.”

“In the meantime, food inflation sits at 17.2%, effectively adding an extra £833 to the annual household grocery spend — a cost which impacts the vulnerable the most, and that people simply can’t avoid.”

“The impact is that over the next few months, many more will be missing payments as they struggle to keep up with everyday essentials, bills and credit agreements — and it’s not only affecting people’s financial future, but for millions, their mental wellbeing too.”

	April price cap	July price cap	Reduction
Price cap level*	£3,280	£2,074	£1,206
What customers pay* (with Energy Price Guarantee)	£2,500	£2,074	£426