The government regulator for gas and electricity markets, Ofgem, has announced that around 15 million households in the UK will benefit from reduced energy bills when the changes are rolled out in April.
The default energy price cap will fall from £1,179 to £1,162, while the pre-payment meter cap will from £1,217 to £1,200.
Experts had speculated that the cuts made by Ofgem would be more significant, between £20 and £60, despite the wholesale prices of gas and electricity currently being at their lowest for around 10 years.
In a statement on the government website, Ofgem said:
“The default price cap, which protects around 11 million households, is set to fall from £1,179 to £1,162 for the summer period (April - September). The pre-payment meter cap, which protects a further 4 million households, will fall from £1,217 to £1,200 per year for the same six month period.
A large part of the reduction in the caps is due to wholesale energy prices continuing to fall between August 2019 and January 2020. A strong supply of gas, such as record amounts of liquefied natural gas and healthy gas stock inventories, has been the main factor pushing down wholesale prices.
Ofgem closely monitors all suppliers’ approaches to complying with the cap and has taken tough action when they have not met their obligations.”
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Jonathan Brearley, chief executive of Ofgem said that the cap is “designed to protect consumers who do not switch from overpaying for their energy, whilst encouraging competition in the retail market”.
The news comes just days after a study by consumer group, Which?, found that the number of energy tariffs priced at under £1,000 had increased dramatically since the introduction of the energy cap in January 2019.
According to Which?, a ‘medium user’ now has access to 650% more cheap energy deals than before the tariff was put in place with 78 deals available, compared with only 12 previously.
Despite the drop in prices, personal finance correspondent at the BBC, Simon Gompertz, has warned that “complacency can be dangerous”, arguing that millions of people are still paying more than necessary for their energy because they “haven’t bothered to scour the market for the best offer”.
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