This means that the government’s Energy Price Guarantee, which was introduced as a frozen price cap to subsidise customers’ bills when Ofgem’s price cap level became prohibitively high, will no longer be used. Its level was £2,500 but now that Ofgem’s price cap level has dropped below £2,500, unit rates will be capped at that £2,074 level. However, the Energy Price Guarantee’s level will rise to £3,000 and run in the background until April 2024 if needed.
Customers may not see an immediate difference in their bills because the government’s Energy Bills Support Scheme, which further subsidised most customers’ bills with monthly payments of £66-67, ended in March. However, there should now be scope for suppliers to bring fixed deals back to market, which will help give customers price certainty at what remains a difficult time thanks to the ongoing cost of living crisis.
Natalie Mathie, energy expert at Uswitch.com, comments: “The first price cap drop in two years is confirmation that the tide is finally turning for long-suffering energy customers.
“The average household can expect monthly direct debits to be set at £173, although typical seasonal usage may only see you spend £110 a month over the summer.
“While this is good news, the majority of homes are on standard variable tariffs and now subject to the volatility of price cap changes every three months.
“This is a watershed moment for energy suppliers who can now look to start offering fixed deals again, given the market conditions - and would help to encourage genuine competition in the retail energy market.
“Customers should have the choice of whether to lock in the benefits of lower wholesale prices for 12 months, just as they do in the mortgage market. If deals are priced fairly, this could offer much needed peace of mind, particularly over the high usage winter period.
"We see no reason why energy suppliers cannot offer competitive fixed deals around the £2,000 level.
“After a long spell of having no option but to try to reduce their usage at home, now is the time for energy customers to start paying attention to the market again.”
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