Ofgem will reduce the energy price cap by almost £1,000 in April, the energy regulator announced this morning (Monday, February 27).

From April 1, the energy price cap will be set at an annual level of £3,280 for a dual fuel household paying by direct debit, down from the current level of £4,279.

The energy cap will be in place between April 1 and June 30, and reflects how much consumers would pay on their energy supplier’s basic tariff if the government’s Energy Price Guarantee (EPG) were not in the place.

The EPG was introduced by former Prime Minister Liz Truss in October 2022 to reduce the impact of the rising energy costs on domestic customers during the cost of living crisis.

It was originally set at £2,500 for two years however, it will increase to £3,000 from April 1 until the end of March 2024.

The energy price cap won’t fall below the £3,000 EPG level so consumers won’t see a reduction in the cost of their bills just yet but it is a good sign.

Jonathan Brearley, CEO of Ofgem, explains: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the EPG. This means, that on current policy, bills will rise again in April. I know that, for many households this news will be deeply concerning.

“However, today’s announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won’t make an immediate difference to consumers, it’s a sign that some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease.

“If the reduction in the wholesale prices we’re currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.

“However, prices are unlikely to fall back to a the level we saw before the energy crisis. Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain.

“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to. We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”

You can read the full update from Ofgem here.

Picture credit – Image by Steven from Pixabay