According to the latest figures released by the UK’s energy regulator Ofgem, the cost of electricity in the United Kingdom is set to drop by 7 percent from 1 July due to a decrease in the wholesale price of gas.
This price cut, which was announced Friday, reduces the annual bill for an average household that pays by direct debit from PS1,720 to PS1,720. It is a small but welcomed reduction in the face of the continuing cost-of living squeeze.
This move ends a quarterly cycle of price hikes, though energy costs are expected to continue being high by historic standards.
Cornwall Insight, a consultancy, does not expect a drastic hike this winter. However, they have forecast a small increase in next year’s price caps, which suggests that there will be little relief for those households who are already in a difficult situation.
The bills are still well above the pre-crisis level
Even with the recent cut in energy prices, bills are still significantly higher compared to previous years.
The average bill for 2019 was PS 1,137.
The adjusted PS 1,720 figure today represents a 51 percent increase in six years.
Ashton Berkhauer is an energy expert with MoneySuperMarket. He said that the numbers show how entrenched energy prices have become.
He noted that “even after this decline, we are a far cry from what used to be considered normal.”
The energy crisis, which began several years back, has left many households struggling with its effects. This is compounded due to the COVID-19 virus pandemic, and by the conflict in Ukraine. Both of these factors have caused a sharp rise in the price of gas and electricity.
Even though Prime Minister Keir starmer made an election promise to address the rising cost of energy, today’s bills are still roughly 10% more expensive than they were when Labour came into power.
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Ofgem encourages consumers to compare prices
Ofgem has acknowledged that, while the reduction of 7% in the price cap is positive, the prices are still high by historic standards.
Tim Jarvis of Ofgem’s Director general for markets, Tim Jarvis, advises consumers to speak to their existing providers or consider other tariffs to get better deals.
He said, “You do not have to pay for the price cap.” There are cheaper deals available. You could save PS136 per year by switching to smart pay-as you-go or direct debit.
Jarvis said that long-term reforms were needed to stabilize prices and ensure energy security.
He said: “We are working with the government closely to secure the investments we need in order to achieve our net zero and clean energy targets as soon as possible.”
The volatile energy market puts pressure on the government
Experts warn that geopolitical or economic changes can have a significant impact on wholesale prices. The pressure is increasing for the government to offer more targeted assistance to low-income households and those who are vulnerable.
Although British gas prices are down nearly 30% from the beginning of this year, in the last few weeks they’ve been on the rise again, underlining the inherent volatility of the market.
Cornwall Insight attributes the recent price drop to several factors. These include warmer than average temperatures, international developments like the relaxation of European Gas Storage Regulations and the newly announced US Trade Tariffs.
Dr Craig Lowrey of Cornwall Insight cautions that the relief you may feel is only temporary.
He said: “This drop in the price caps is certainly welcome news to households. It offers a measure of relief during a period when many struggle with high living expenses.”
The energy market is unpredictable, and while we should celebrate small victories, it remains unpredictible. Events on the global stage can change trends quickly.
The energy suppliers have also warned that it is not safe to assume the worst has passed.
EDF Energy stated that market volatility remains high and further actions are needed to protect the customers most at risk.
The company called on the UK government to adopt long-term measures to protect the UK’s energy system against international price fluctuations.
The cost of other utilities can add significantly to the household budget
Water bills are on the rise despite energy costs falling in July.
The average UK water bill increased 26% in April — the highest annual increase ever recorded.
This increase has been attributed by some to investments in infrastructure as well as efforts to combat the public’s growing anger over sewage and water pollution.
The parallel rises have led to a wider utility squeeze for households, even though headline inflation is beginning to stabilize.
As new information becomes available, this post Energy Price Cap to Cut Bills by 7% in July but Households Still Under Stress may change.
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