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Gas and electricity bills will fall for about 15 million households this summer after the energy regulator Ofgem reduced its price cap on standard bills in response to falling global energy markets.
The price of the average dual-fuel energy bill will fall from £1,179 to £1,162 – a reduction of £17 – for 11 million households that use a standard variable energy tariff to buy their energy.
There will be a similar reduction for the 4m homes that have a prepay meter, with the average price of gas and electricity to fall from from £1,217 to £1,200.
Ofgem has lowered the cap, which is designed to guarantee a fair price for energy customers, in line with the falling price of gas and power on the wholesale energy markets.
The new cap will take effect from 1 April and remain in place for six months.
Ofgem’s new chief executive, Jonathan Brearley, said the cap has saved households about £1bn since it was introduced at the beginning of last year.
“Today’s announcement is further good news for the 15 million households covered by both price caps who will see their energy bills fall in April. Households can reduce their energy bills further by shopping around for a better deal,” he said.
Although the price cap protects only customers who use standard variable tariffs to buy their energy, the impact of the lower price cap is likely to prompt energy suppliers to offer cheaper fixed term deals, too.
The Guardian reported late last year that millions of homes could look forward to lower energy bills in 2020 after the market price for gas fell by half to reach lows not seen in a decade.
In the UK the market price for gas hit 10-year lows of 24.75p per therm in September, compared with an average price of 55.63p the year before after a record number of gas cargoes from the US, Russia and Qatar poured into Europe.
James Huckstepp, an analyst at S&P Global Platts, has predicted that the price of gas could fall by a further 30% to an average of 27p per therm in 2020 as more sea-borne gas cargoes make their way to UK shores.
Although most energy tariffs in the market are likely to fall after the price of gas dropped, customers have been urged to shop around for the best energy deal, too.
Ed Dodman of the Energy Ombudsman said the regulator’s falling energy price cap “is good news for the millions of UK households currently on default tariffs but shouldn’t discourage people from shopping around for better deals”.
He said: “When switching, we would encourage consumers to look at the customer service they can expect to receive as well as how much money they could save. Customer review sites and tools such as the Citizens Advice star ratings league table – which is based partly on Energy Ombudsman complaints data – will enable a consumer to make an informed decision.”
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