Energy costs drop to lowest levels in the last two years
Ofgem price cap falls saving UK homeowners £238 in yearly bill
The average household energy bill have fallen to the lowest point in two years after Ofgem lowered its price cap in response to wholesale prices.
In some long-awaited good news for energy customers, the regulator's price cap has dropped by 12.3 per cent from the previous £1928 for a typical dual fuel household in England, Scotland and Wales to £1690, a fall of £238 over the course of a year or about £20 a month.
The average household on a standard variable tariff (SVT) is expected to spend £127 on energy in April, compared with £205 in March, due to a combination of cheaper rates and lower usage as the weather warms up.
Some 10 million households who are on SVTs and do not have a smart meter have been urged to send meter readings to their supplier as soon as possible to ensure they are charged at the cheaper rate.
Suppliers who have not received meter readings base their bills on estimated usage, meaning households could be overpaying, while others may not be paying enough.
The difference between a week’s worth of energy at the old rates compared with a week in April was £4.65 for the average household, Uswitch warned.
Nearly a fifth of households who do not have a smart meter (18 per cent) have not submitted their meter readings in the last three months, and 4 per cent have not done so for a whole year, a survey for the comparison site found.
Ofgem said the price cap drop would see energy prices reach their lowest level since Russia's invasion of Ukraine in February 2022, which caused a spike in the energy market.
However, the regulator has also allowed a temporary additional payment of £28 a year, or £2.33 a month, to make sure suppliers have enough funds to support customers who are struggling.
This will be added to the bills of customers who pay by direct debit or standard credit and is to be partly offset by the end of an allowance worth £11 per year that covered debt costs related to the Covid pandemic.
Prepayment meter customers will not have to pay the extra charge, as many do not build up the same level of debt as credit customers because they top up as they go, Ofgem said.
The regulator also confirmed plans to set a permanent solution to prepayment customers paying higher standing charges, which was removed by the Government's temporary Energy Price Guarantee.
Ofgem said the solution must be funded by billpayers rather than taxpayers, to maintain fairness, meaning prepayment customers will save about £49 per year while direct debit customers will pay £10 more each year.
Campaigners have warned that while the costs that households pay for every unit of energy they use will decrease “slightly”, they were still almost double what they were in 2021.