The reduction in the price cap level - which, as always, is an illustrative amount that could be more or less for different customers depending on how much energy they use - was widely expected, and is the result of several months of falling wholesale energy prices across Europe.
However, for the moment, it does not have any bearing on the amount that energy customers will pay because of the government’s Energy Price Guarantee. This was a supportive measure introduced by the government in October 2022 to ensure that average use customers would effectively not pay more than £2,500 per year for their energy regardless of the level of the price cap. That level will rise to £3,000 per year in April 2023, and as long as the price cap is higher than the level of the Energy Price Guarantee, the government will continue to subsidise the cost of energy to suppliers.
This means that, currently, customers will see an increase in their energy bills from 1 April 2023 at the same time that financial support measures are due to end. Those who are concerned about their ability to pay for their energy use are encouraged to see what support is available and speak to their supplier.
Richard Neudegg, director of regulation at Uswitch.com, comments: “This significant fall in the Ofgem price cap should mark a turning point for the energy market, and could be the last quarter in which the cap is priced above the current Energy Price Guarantee level.
“Yet, with the Energy Price Guarantee still set to rise by 20% to £3,000 a year for average consumption and the end of the £400 Energy Bills Support Scheme, households will be facing higher bills from April.
“Wholesale prices have dropped more than 50% since December 2022 but consumers have yet to feel the benefit.
“Now is the time for fixed deals to return to the market to get the benefits of falling wholesale prices to consumers as soon as possible. After 18 months of sky-high energy bills, households need stability as well as choice in who their energy provider is and what they pay.
“A return to fixed deals will bring the benefits of competition back to the market, giving consumers the chance to vote with their feet and choose a supplier with the best deal and customer service, as well as locking in more price certainty.
“Current intervention, including the market stabilisation charge implemented by Ofgem, is actively dissuading suppliers from offering competitive deals that consumers desperately need.”
Confused by your energy bill? Confused by your electricity bill? You’re not alone. Read the Uswitch guide and all will become clear.Learn more
Information on the energy price cap set by Ofgem, including the frozen Energy Price Guarantee rate of £2,500, which came into effect in October 2022.Learn more
What does the average UK gas and electricity bill look like? See how your energy usage and bills compare against Ofgem's averages for 2023.Learn more