Ofgem has lowered the cap to an annual level of 3,280 pounds ($3,925.18) for a typical dual-fuel household from the current 4,279 pounds, reflecting a recent decline in wholesale energy prices, Reuters reported.
The cap sets a maximum price suppliers can charge consumers for each kilowatt hour (kWh) of energy they use, but it has been superseded by a government-backed energy price guarantee (EPG) that limits the maximum costs of energy.
That EPG is set to rise to 3,000 pounds a year for average consumption from April, up from 2,500 pounds currently.
This means that, from April and without further changes in government policy, energy bills for a typical household will rise by about 20%, Ofgem said.
“Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means, that on current policy, bills will rise again in April,” said Ofgem Chief Executive Jonathan Brearley.
Ofgem updates the cap every quarter. If wholesale prices continue to fall, the price cap could be lowered again in July, potentially reducing bills, the regulator said.
British Gas owner Centrica (CNA.L) this month posted record annual profit of 3.3 billion pounds on soaring energy prices and production.
‘VERY TOUGH TIME’
Wholesale prices have fallen by about 50% since December but are still significantly higher than in previous years.
“Prices are unlikely to fall back to the level we saw before the energy crisis. Even with the extensive package of government support that is currently in place, this is a very tough time for many households across Britain,” Brearley added.
European energy prices started to rise at the end of 2021 as the world emerged from COVID-19 lockdowns and then surged last year after Russia’s invasion of Ukraine.
The cost of wholesale gas and the price suppliers need to charge per unit of energy went up sharply as a result, prompting the government to step in to help consumers.
British opposition parties and campaigners have called on UK finance minister Jeremy Hunt to protect consumers against the rise in their bills in April as the cost of living crisis continues to take its toll.