Ofgem drops retail energy price cap to lowest level in two years in boost for households

The UK’s electricity and gas watchdog has lowered the energy price cap for consumers to the lowest level in two years.

Ofgem this morning said the price cap will fall by 12.3 per cent on the previous quarter from 1 April to 30 June 2024.

For an average household paying by direct debit for dual fuel, this equates to £1,690, a drop of £238 over the course of a year – saving around £20 a month.  

The body said this will see energy prices fall to their lowest level since Russia’s invasion of Ukraine in February 2022. The war caused a further spike in an already turbulent wholesale energy market, driving up costs for suppliers and ultimately customers. 

“This is good news to see the price cap drop to its lowest level in more than two years, but there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers,” said Ofgem chief Jonathan Brearley.

Ofgem also added a raft of measures alongside the price cap drop to continue to help with the cost of living crisis.

These included normalising standing charges across the board to remove the ‘PPM premium’ previously incurred by prepayment customers, including keeping existing wholesale cost allowances and extending the ban on acquisition-only tariffs (BAT) for up to another 12 months.

Brearley added: “But longer term we need to think about what more can be done for those who simply cannot afford to pay their energy bills even as prices fall.

“As we return to something closer to normality we have an opportunity to reset and reframe the energy market to make sure it’s ready to protect customers if prices rise again.” 

Dr Craig Lowrey, Principal Consultant at Cornwall Insight who correctly predicted the price cap shift, said:

“Even with the drop, prices will remain a struggle for many – we need to remember, bills remain hundreds of pounds above pre-pandemic levels, and if we don’t speed up the switch to sustainable energy and cut down on volatile imports, they are likely to stay that way.”

Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU) added: “Lower bills and energy independence will come from reducing our gas demand, through insulating homes and moving away from gas boilers. That ought to be the priority of any Government that wants bills lowered and British energy powering British homes.”