Energy bills set to drop by up to £95 as Ofgem cuts price cap

Ofgem has said it will slash bills for around 15 million households by as much as £95 as the regulator reduced its cap on energy bills to their lowest level yet.

Officials said the new cap would pass on savings from lower energy prices to many households that are suffering economic hardship during the pandemic.

The price cap has been set at £1,042 per year for an average household and will come into force from October 1, Ofgem said.

It is an £84 drop for customers on their supplier's standard tariff and a £95 drop for those with prepayment meters.

30 PHOTOS
Pictures of the week: August 2 - 8
See Gallery
Pictures of the week: August 2 - 8
Sunbathers wearing face masks while sitting on deck chairs at South Bay beach during the hot weather. The UK is set to bask as temperatures will reach 36 degrees Celsius in the capital during a mini heat wave. (Photo by Yiannis Alexopoulos / SOPA Images/Sipa USA)
Thousands of used cars lined up at a site in Corby, Northamptonshire, waiting to be distributed to car dealerships around the UK.
Men doing boxing training at Regents Park in London as temperatures are set to rise to as high as 36C during the weekend in parts of the UK.
An Uber Boat sails on the River Thames. The first branded Uber Boat by Thames Clippers sails on the River Thames this week, marking the start of a partnership between Uber and Thames Clippers. (Photo by Dave Rushen / SOPA Images/Sipa USA)
NEWCASTLE UPON TYNE, ENGLAND - AUGUST 05: Two women wear onesies as they watch the movie Jaws during a drive-in cinema experience at Newcastle Airport on August 05, 2020 in Newcastle upon Tyne, England. The venue at Newcastle airport is one of 12 venues around the country that will host the drive-in cinema tour offering 80’s classics and 2010’s blockbuster movies. Entertainment is provided ahead of each screening with stand-up comedy, bingo and ‘careoke’. Due to coronavirus restrictions cars are parked 2-metres apart during the screenings and other safety measures have been put in place. Food can be ordered by those attending using a special app and which is then delivered to the cars by staff. A number of tickets at each of the screenings will also be offered for free to NHS and care workers who wish to attend. (Photo by Ian Forsyth/Getty Images)
NEWCASTLE UPON TYNE, ENGLAND - AUGUST 05: Cars park up to watch a showing of Jaws during a drive-in cinema experience at Newcastle Airport on August 05, 2020 in Newcastle upon Tyne, England. The venue at Newcastle airport is one of 12 venues around the country that will host the drive-in cinema tour offering 80’s classics and 2010’s blockbuster movies. Entertainment is provided ahead of each screening with stand-up comedy, bingo and ‘careoke’. Due to coronavirus restrictions cars are parked 2-metres apart during the screenings and other safety measures have been put in place. Food can be ordered by those attending using a special app and which is then delivered to the cars by staff. A number of tickets at each of the screenings will also be offered for free to NHS and care workers who wish to attend. (Photo by Ian Forsyth/Getty Images)
A man wearing a face mask rides a bus through Bank Junction in the City of London financial district in London, England, on August 5, 2020. This week has been the first of the government push to get workers in England back to their offices, though many nonetheless remain working from home as the country continues its cautious emergence from the coronavirus lockdown. (Photo by David Cliff/NurPhoto via Getty Images)
A man jogs across London Bridge in London, England, on August 5, 2020. This week has been the first of the government push to get workers in England back to their offices, though many nonetheless remain working from home as the country continues its cautious emergence from the coronavirus lockdown. (Photo by David Cliff/NurPhoto via Getty Images)
The Duchess of Cambridge helps unloading a pallet of supplies during a visit to Baby Basic UK & Baby Basics Sheffield. Baby Basics is a volunteer project supporting families in need struggling to provide for their newborns.
LONDON, ENGLAND - AUGUST 05: A fossilised skeleton of a Stegosaurus Dinosaur is pictured wearing a face mask before the reopening of the Natural History Museum on August 5, 2020 in London, England. The museum closed for 5 months due to COVID-19. (Photo by Ian Gavan/Getty Images)
One of the eight-week-old Sri Lankan leopard cubs plays with mother Sariska in their enclosure at Banham Zoo, Norfolk. The pair of male cubs, who are yet to be named, were born on June 4 to mother Sariska and her breeding partner Mias. (Photo by Joe Giddens/PA Images via Getty Images)
Fulham's Maxime Le Marchand, from left, Anthony Knockaert, Neeskens Kebano, Aboubakar Kamara and Denis Odoi celebrate with the trophy after winning the English Championship Play Off soccer final between Fulham and Brentford, at Wembley Stadium, in London, Tuesday, Aug. 4, 2020. (Mike Egerton/PA via AP)
The sun rises behind the Sunflower Maze in Tarbock, Merseyside, where farmer Olly Harrison and his staff decided to #sayitwithsunflowers and visitors can explore half a million sunflowers planted across 17 acres (equivalent to over 12 football pitches). The flower maze, visible from the air from planes approaching Liverpool airport, is open to the public with half of the profits going to NHS charities and its charitable partners. (Photo by Peter Byrne/PA Images via Getty Images)
COBHAM, ENGLAND - AUGUST 03: Jessie Fleming of Chelsea in action during a Chelsea FC Women's Training Session at Chelsea Training Ground on August 03, 2020 in Cobham, England. (Photo by Harriet Lander - Chelsea FC/Chelsea FC via Getty Images)
Flowers and a message to the late John Hume rest below a Free Derry Corner in the Bogside of Derry City that shows Hume and others important figures during the movement. The Former SDLP leader, who was one of the key architects of peace in Northern Ireland, has died at the age of 83. (Photo by Liam McBurney/PA Images via Getty Images)
Wild horses in the New Forest roam as the sun sets. (Photo by Steve Parsons/PA Images via Getty Images)
A sail boat passes Old Harry Rocks near Swanage, Dorset. (Photo by Steve Parsons/PA Images via Getty Images)
Farrah Maddox, aged 17, feeds parakeets in St James's Park in London. (Photo by Kirsty O'Connor/PA Images via Getty Images)
Men jump from a jetty into the water as the hot weather continues, at Southend-on-Sea, in England, Sunday, Aug. 2, 2020. (Victoria Jones/PA via AP)
Pelicans in St James's Park in London. (Photo by Kirsty O'Connor/PA Images via Getty Images)
BIRMINGHAM, ENGLAND - AUGUST 03: Clouds gather over Edgbaston during day 3 of the Bob Willis Trophy match between Warwickshire and Northamptonshire at Edgbaston on August 03, 2020 in Birmingham, England. (Photo by David Rogers/Getty Images)
An employee wearing a face mask or covering due to the COVID-19 pandemic, welcomes customers to a Five Guys restaurant in Manchester, northwest England on August 3, 2020, as the Government's "Eat out to Help out" coronavirus scheme to get consumers spending again gets underway. - Britain's "Eat out to Help out" scheme began Monday, introduced last month by Chancellor Rishi Sunak to help boost the economy claw its way from a historic decline sparked by the coronavirus crisis. (Photo by Oli SCARFF / AFP) (Photo by OLI SCARFF/AFP via Getty Images)
A group of British passengers arrive at Ibiza international airport from London Heathrow on a British Airways flight, as the tourism industry in Spain has been hit hard by the latest 14-day quarantine requirement by the British government for all tourists that travel from Spain because of its high levels of COVID-19 cases. Picture date: Sunday August 2, 2020.
A man relax by the Rushden Lakes to enjoy the warm weather over the weekend With the warm weather in the UK, people ventured outdoors amidst the novel coronavirus pandemic reprise. (Photo by David Mbiyu / SOPA Images/Sipa USA)
Customers sit outside a bar, near a sign promoting post-COVID-19 lockdown shopping, in Manchester, northwest England on August 3, 2020, as the Government's "Eat out to Help out" coronavirus scheme to get consumers spending again gets underway. - Britain's "Eat out to Help out" scheme began Monday, introduced last month by Chancellor Rishi Sunak to help boost the economy claw its way from a historic decline sparked by the coronavirus crisis. (Photo by Oli SCARFF / AFP) (Photo by OLI SCARFF/AFP via Getty Images)
LONDON, ENGLAND - AUGUST 02: A Harrogate Town player holds up his medal as he talks to someone on his phones following the Vanarama National League Play Off Final match between Harrogate Town and Notts County at Wembley Stadium on August 02, 2020 in London, England. (Photo by Catherine Ivill/Getty Images)
Mercedes driver Lewis Hamilton of Britain steers his car during the British Formula One Grand Prix at the Silverstone racetrack, Silverstone, England, Sunday, Aug. 2, 2020. (AP Photo/Frank Augstein, Pool)
People seen rowing a canoe on the Rushden Lakes on a warm summer day. With the warm weather in the UK, people ventured outdoors amidst the novel coronavirus pandemic reprise. (Photo by David Mbiyu / SOPA Images/Sipa USA)
Signs outside the Home Farm Cafe, which is running with protective measures against coronavirus, at Beningbrough Hall, a National Trust site in North Yorkshire
Customers queue outside the Primark store in Rushden Lakes. The Government has made it mandatory to wear face coverings in all public transport, supermarkets and indoor shopping centers as a measure to combat the spread of the novel coronavirus. (Photo by David Mbiyu / SOPA Images/Sipa USA)
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

The new cap will remain in place for six months until Ofgem reviews it again.

Ofgem also said it would recommend that business secretary Alok Sharma should extend the price cap into next year.

"Millions of households, many of whom face financial hardship due to the Covid-19 crisis, will see big savings on their energy bills this winter when the level of the cap is reduced," said Ofgem chief executive Jonathan Brearley.

"They can also reduce their energy bills further by shopping around for a better deal. Ofgem will continue to protect consumers in the difficult months ahead as we work with industry and government to build a greener, fairer energy market."

The cost for energy suppliers to buy gas and electricity has dropped significantly since the start of the year. As large parts of the global economy has closed down during the pandemic, demand for energy has reduced – making it cheaper to buy.

But Ofgem warned gas prices have recovered from their 20-year lows this spring, and if the cost of gas continues to rise, the regulator will likely increase the cap in April.

Suppliers are not allowed to charge above the cap but they can offer cheaper deals for savvy customers.

Ed Dodman, director of regulatory affairs at the Energy Ombudsman, said: "This reduction in the price cap represents a much-needed financial boost for millions of households, at a time when many people are struggling due to the economic impact of Covid-19 and lockdown.

"Shopping around for a cheaper energy deal is still the best way to save money, particularly for customers on standard variable tariffs, but before switching to a new supplier it's a good idea to check out its customer service credentials."

Emma Pinchbeck, chief executive of supplier trade body Energy UK, said: "Today's announcement reflects another significant fall in wholesale costs since Ofgem set the current price cap. Most of the average bill is made up of costs outside suppliers' direct control and buying energy accounts for the biggest share of these.

"Lower wholesale prices are only part of the story – because of Covid-19 energy suppliers are facing likely increases in debt and other rising system costs, in an industry which already operates on small margins."

Read Full Story Click here to comment

FROM OUR PARTNERS