Ofgem has today announced the April Default Tariff Cap (price cap) at £1,690 a year for a typical dual fuel consumer. This is a 12% decrease from January’s cap set at £1,928 a year.
A healthy flow of gas across the Atlantic, coupled with a relatively mild winter, has seen higher than expected gas reserves in Europe and consequently lower wholesale prices. Additionally, high levels of gas reserves in Asia have helped drive down global prices.
While the wholesale element of the cap continues to fall, electricity standing charges are set to increase. This is primarily due to the ongoing reform of network charges, which has shifted more of the charges from per unit to per day, meaning that customers will incur these costs regardless of their actual consumption.
Ofgem recently held a consultation on how standing charges are applied to energy bills, and is examining the options and potential alternatives.
This is in addition to the provisions for bad debt, and further bill adjustments for customers depending upon how they pay their energy bills.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
“After January’s price cap rise, it is good to see energy bills moving in the right direction for households. Signs currently point towards costs remaining below current levels for the rest of the year, and while it’s wise not to get ahead of ourselves, there are promising signals that the energy market is starting to stabilise.
“While the prospect of lower bills is certainly positive, they still remain hundreds of pounds above what customers were paying at the start of the decade, with little to indicate that will be changing any time soon.
“Ofgem’s review of standing charges, alongside other discussions on how the cap is calculated, will no doubt have a positive impact on some household energy costs, but fundamental questions remain on how to address the challenge of affordability for households. The price cap is unlikely to be the ticket back to pre-energy crisis bills.
“Ultimately progress requires investment in a resilient, sustainable, energy system, one based on renewable energy supplies and improved energy efficiency. As we approach the general election, we would urge politicians to prioritise this critical issue and unveil solid plans for action.”
Notes to Editors
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About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
"While it's wise not to get ahead of ourselves, there are promising signals that the energy market is starting to stabilise."
Dr Craig Lowrey Principle Consultant
