Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Energy costs to fall for millions of Britons from October

Published 08/07/2020, 02:56 AM
Updated 08/07/2020, 06:10 AM
© Reuters. FILE PHOTO: The sun rises behind electricity pylons near Chester

© Reuters. FILE PHOTO: The sun rises behind electricity pylons near Chester

By Susanna Twidale

LONDON (Reuters) - Energy prices are set to fall for millions of British households from October after the energy regulator said it would lower its cap on the most widely used tariffs by about 7.5%.

A cap on electricity and gas bills came into effect in January 2019 and was aimed at ending what former British Prime Minister Theresa May called "rip-off" prices by energy firms.

The reduction, to the lowest level since the cap began, was due to a fall in wholesale gas prices since February as lockdowns on business and homes hit demand, Ofgem said.

"The COVID-19 crisis has depressed energy demand although wholesale gas prices have started to recover since hitting 20-year lows in the spring," the regulator said in a statement.

The cap for average annual consumption on the most common tariffs, used by around 11 million households, will fall by 84 pounds ($110) to 1,042 pounds, while for some 4 million homes on pre-payment energy meters it will fall by 95 pounds to 1,070 pounds a year, Ofgem added on Friday.

Ofgem calculates the cap using a formula that includes wholesale gas prices, energy suppliers network costs and costs of government policies, such as renewable power subsidies.

Graphic - Breakdown of a British dual fuel (gas and electricity) bill% : https://fingfx.thomsonreuters.com/gfx/ce/dgkpldzzrpb/Pasted%20image%201596782287268.png

However, Ofgem warned that with wholesale prices beginning to rise the cap is likely to be increased at the next review, which comes into affect in April.

Under legislation the cap could be lifted from 2020 and no later than 2023.

Ofgem on Friday recommended it should remain in place next year, with an ultimate decision to be taken by the government by the end of October.

"Our assessments shows this is not the right time to remove the cap," Jonathan Brearley, Ofgem's chief executive, told reporters on a call.

He said the regulator would like to see a more competitive market, better customer engagement and more technology such as smart meters deployed before the cap is removed.

Despite the cap, Ofgem said those seeking cheaper energy prices may still find better deals by shopping around.

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Breakdown of a British dual fuel (gas and electricity) bill % https://tmsnrt.rs/2Ptx1os

© Reuters. FILE PHOTO: The sun rises behind electricity pylons near Chester

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.