After regulator reduces cap, energy bills for most Britons will fall

Energy regulator Ofgem announced a 7% price cap on Wednesday, allowing the government to reduce costs.

The move follows the plans in last year's Budget to shift some costs of renewable energy to general taxes and to scrap a program requiring suppliers fund measures like insulation for low income households.

Tim Jarvis said that the main reason for the reduction in today's prices is the new policy costs announced by Chancellor George Osborne. The new cap of 1,641 pounds ($2,218.96), a year, for average electricity and natural gas consumption is 117 pounds less than the previous level for January to March. Last year, the government announced that it would transfer 75% of the cost for the Renewables Obligation (which funds renewable energy generation) from consumer bills to general taxes starting in April. The government also announced that it would end a program requiring energy companies fund insulation and new heating systems for households with low incomes. It added that the two measures would save households an average of 150 pounds per year. The soaring costs of the network have offset some savings.

Ofgem's formula for calculating the price cap includes wholesale gas and electricity prices. These have fallen over the last few months. However, network costs are increasing as the network is upgraded. As levies for a 24 billion-pound upgrade of the country's transmission system began to be added, network costs increased by 66 pounds.

ENERGY RATES STILL HIGH

Consumer groups say that despite the drop in energy prices, many people still find it difficult to pay for their bills. They urge more help for those who are struggling.

Simon Francis, coordinator for the End Fuel Poverty Coalition, said that bills are still hundreds of pounds higher than pre-crisis. "For millions of families living in cold and damp homes, this will not feel like the end of the cost of life crisis," he added.

Even at this new level, the price cap is still around 30% higher than it was in the winters of 2021/22, when Russia's invasion of Ukraine caused a surge in energy prices worldwide.

The government says the April price drop shows that it is taking steps to reduce costs for consumers.

Prime Minister Kier starmer stated in a press release that "I know there is more work to be done - and my government is using every tool at its disposal to bring down the cost of life."

In 2019, the price cap was introduced and covers approximately two thirds of all households. ($1=0.7395 pounds)

(source: Reuters)