Energy price cap drops to lowest level for 2 years: reaction

by | Feb 23, 2024

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Today’s much anticipated announcement from Ofgem has revealed a significant reduction of the energy price cap for the second quarter of 2024. 

The price cap, which sets a maximum rate per unit that can be charged to customers for their energy use, will fall by 12.3% on the previous quarter from 1 April to 30 June 2024. According to Ofgem, tor 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.

Commenting on the energy price cap data, Jonathan Brearley, CEO of Ofgem, said:  

“This is good news to see the price cap drop to its lowest level in more than two years – and to see energy bills for the average household drop by £690 since the peak of the crisis – 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. 

 
 

“That’s why we are levelising standing charges to end the inequity of people with prepayment meters, many of whom are vulnerable and struggling, being charged more up-front for their energy than other customers.  

“We also need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future. We’llbe stepping back to look at issues surrounding debt and affordability across market for struggling consumers, which we’ll be announcing soon. 

“These steps highlight the limitations of the current system – we can only move costs around – so we welcome news that the Government is opening the conversation on the future of price regulation, seeking views on how standard energy deals can be made more flexible so customers pay less if using electricity when prices are lower. 

 
 

“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.” 

Richard Neudegg, director of regulation at Uswitch.com, said: “While no one will be describing £1,690 as cheap, after more than two years of eye-watering energy bills, hard-pressed households may finally dare to hope that the worst is over. 

“A significant 12% average drop in rates from current levels – and the lowest cap in two years – is a reflection that the wholesale energy market has been moving in the right direction. 

 
 

“This price cap will apply from the start of April to the end of June, so the prospect of lower prices does not help consumers trying to power through the rest of this winter. 

“Prices are forecast to slightly fall again in July, but the market remains unpredictable, and it is hard to know how energy rates will look when usage rises again next winter.

“With more than a flicker of optimism for wholesale energy costs, all eyes are now firmly on suppliers to see how they will price their range of deals. 

“Consumers have been patiently waiting for better tariff choices, and many are desperate to take advantage of cheaper rates. If you are on a standard variable tariff, now is the time to start keeping an eye out for deals. 

“The end of the Market Stabilisation Charge also on 1st April will be a positive step, taking out an unnecessary premium on deals. 

“However, Ofgem’s decision to extend the Ban on Acquisition-only Tariffs (BAT) for another year is a gamble. Although this could be cut to six months, while it’s in play, fixed deals risk being more expensive than they would otherwise be, at a time when customers are finally hoping to lock in some certainty.”

Reacting to today’s price cap news, Glynn Williams, UK Country Director, Grundfos, said:

“While Ofgem’s latest energy price cap is a welcome development, fiscal measures are only a temporary solution that do not tackle the problem of energy inefficiency at its root.”

“Rather, households should be empowered to take control of their finances by improving their home’s energy inefficiency in a more impactful and sustainable manner. By implementing low-effort, high-impact measures – such as optimising a heating system through hydraulic balancing, using a controlling device such as a thermostat or replacing an old circulator pump – homes can improve their energy consumption and generate greater energy savings now and well into the future.”

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