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Energy prices will fall from April for 15m UK households in large part because of a decline in wholesale prices, the regulator said on Friday, adding it would review the viability of the initiative in the summer.
It is the second time in less than six months that the energy regulator Ofgem has lowered the cap. The watchdog said that the default price cap, which protects around 11m households, is set to fall to £1,162 from £1,179 for the summer period, which goes from April to September. In addition to that, the pre-payment meter cap, which protects another 4m households, will fall to £1,200 from £1,217 for the same period.
The move applies to households on a so-called default tariff, or customers who have not shopped around for a fixed-price deal, and to those who are pre-paid energy users, who pay for their energy before they use it.
“Suppliers have been required to become more efficient and pass on savings to consumers,” said Jonathan Brearley, the chief executive who took on the top job at the regulator last week.
“In its first year, the cap is estimated to have saved consumers £1bn on average on their energy bills and switching rates have hit record levels,” he added.
The regulator attributed the taper in prices to a strong supply and large gas inventories. The wholesale energy cost fell to £408 from £446, it said. Switching away from a default tariff to a cheaper deal could save a typical household up to £305, it noted.
Ofgem also said that it would carry out a review for the secretary of state this summer on whether the market conditions exist for the default price cap to be lifted or extended past 2020.
Last year, Ofgem was criticised for having to defend a significant rise in fuel bills. The price cap was a flagship measure introduced by Theresa May’s government.
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