UK slashes energy price cap but bills will still spike

The maximum price of gas and electricity units in the UK will be reduced from April, energy regulator Ofgem announced on Monday. 

As part of efforts to lower energy costs for consumers, Ofgem said the quarterly cap on bills for average dual fuel households paying by direct debit will be cut by 23% to £3,280 ($3,921) in the year’s second quarter.

Despite the reduction, though, average energy bills are still expected to rise.

“From 1 April 2023, the Energy Price Guarantee (EPG) is expected to increase from £2,500 to £3,000 for a typical dual fuel direct debit domestic consumer and will be extended until April 2024,” read an Ofgem statement. 

“That means from 1 April 2023, a typical household in Great Britain will see an increase in their bills. However, the EPG still reflects a discount relative to the underlying price cap,” it added.

Industry and consumer groups have urged the government not to increase its subsidy level to £3,000, citing cheaper wholesale energy prices that have eased the fiscal burden on the Treasury.

The energy price cap is a government initiative aimed at protecting consumers from excessively high energy bills.

It limits the maximum amount that suppliers can charge for standard variable tariffs, which is the default energy plan for many households.

According to latest data, the average energy bill for a typical a three-bed house in the UK is around £1,138 per year.

Ofgem has also advised consumers to shop around for the best energy deals and to consider switching suppliers to get the best value for their money.