07 Aug Energy bills to fall by up to £95 as Ofgem cuts price cap | Business News
Ofgem has said it will cut bills for around 15 million households by up to £95 after reducing its cap on energy bills to the lowest level yet.
The price cap has been set at £1,042 per year for an average household and will come into force from October, Ofgem said.
It is an £84 drop for customers on their supplier’s standard tariff and a £95 drop for those with prepayment meters.
Ofgem said that the reduction is due to a fall in wholesale gas prices since February, as the nationwide coronavirus lockdown of businesses and homes led to a slump in demand.
“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.
Ofgem also recommended the cap, which is adjusted twice a year, should remain in place next year.
The cap on electricity and gas bills came into effect in January last year and was aimed at ending what Theresa May, prime minister at the time, called “rip off” prices.
It is calculated using a formula that includes wholesale gas prices, energy suppliers’ network costs and costs of government policies, such as renewable power subsidies.
Ofgem said those seeking cheaper energy prices may still find better deals by shopping around.
Sky’s business presenter Ian King asked the regulator’s chief executive Jonathan Brearley how energy companies were coping, given that around a dozen have failed in the past 18 months and customers are more likely to struggle with bills due to the coronavirus pandemic.
Mr Brearley said: “Like any business, COVID has affected the energy industry and as people face financial hardship, I’m sure there will be implications across the board.
“However, we keep a close eye on the market and we’re not (currently) concerned about widespread company failure.”
He added: “It is a market and in a market companies do fail. Our job when that happens is to make sure customers are protected, which is what we do.”