Household energy bills will fall by 7 per cent from July, Ofgem confirmed today.
The typical bill will drop by £129 to £1,720 per year when the regulator’s new price cap – which sets the limit on how much firms can charge customers per unit of energy – comes into force.
This is £660 (28 per cent) lower than at the height of the energy crisis at the start of 2023 when the Government implemented the energy price guarantee.
However, prices remain elevated with the upcoming level £152 (10 per cent) higher than the same period last year.
Ahead of the next rise, the price cap since April is currently set at around £1,849 for a typical household after three consecutive increases in bills.
But it is now going to fall after US President Donald Trump‘s aggressive tariff plans led to a significant slump in gas and oil prices.
However, the predicted drop is slightly less than the previously forecast 9 per cent fall following an easing of trade tensions in recent weeks.
Cornwall Insight said it expects the reduced price cap to be followed by a ‘modest drop’ this October and another similar dip in January next year.
The typical bill will drop by £129 to £1,720 per year when the regulator’s new price cap begins
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The price cap does not limit total bills because householders still pay for the amount of energy they consume.
However, news of a fall in energy costs will come as a relief for households, who suffered through an ‘awful April’ of bill rises, including Ofgem’s last 6.4 per cent price cap increase.
Under-pressure households have also been hit with the biggest increase to water bills since at least February 1988, alongside steep rises across bills for council tax, mobile and broadband tariffs, as well as road tax.
Bill increases have led to Consumer Prices Index (CPI) inflation jumping to 3.5 per cent in April, up from 2.6 per cent in March and the highest since January 2024.
Tim Jarvis, director general of markets at Ofgem, said: ‘A fall in the price cap will be welcome news for consumers, and reflects a reduction in the international price of wholesale gas.
‘However, we’re acutely aware that prices remain high, and some continue to struggle with the cost of energy.
‘The first thing I want to remind people is that you don’t have to pay the price cap – there are better deals out there so it’s important to shop around, and talk to your existing supplier about the best deal they can offer you.
‘And changing your payment method to direct debit or smart pay as you go can save you up to £136.
‘In the longer term, we need an energy system where prices are insulated from the volatile international gas market, and which ensures more stable prices and energy security.
‘And we’re working closely with government to get the investment we need to reach our clean power and net zero targets as quickly as possible.
‘We’re also doing everything we can to support consumers today and pushing ahead with more changes to help consumers.
‘This includes working on ways to support those trapped in energy debt and bringing in reforms to standing charge tariffs for this winter.’
Ofgem changes the price cap for households every three months, largely based on the cost of energy on wholesale markets.
Energy Secretary Ed Miliband said the fall in energy bills from July is welcome but stressed that the Government will continue to work towards clean energy to get off the ‘rollercoaster of fossil fuel markets’.
‘This fall in energy bills is welcome news for families across the country and will mean that working people keep more of their money in the coming months.
‘However, we know that it is only through our mission for clean, homegrown power that we can get off the rollercoaster of fossil fuel markets controlled by dictators and petrostates – and give families and businesses energy security and bring down bills for good.
‘As we take back control, we are doing everything we can to support people – from consulting on expanding the £150 warm home discount to around six million households next winter, to upgrading thousands of homes so they are warmer and cost less to heat, to reforming our energy market so consumers are better protected.’
The energy price cap was introduced by the Government in January 2019 and sets a maximum price that energy suppliers can charge consumers in England, Scotland and Wales for each kilowatt hour (kWh) of energy they use.
Citizens Advice chief executive Clare Moriarty said: ‘This drop in energy prices will ease the burden of high bills for some households.
The price cap is now going to fall after aggressive tariff plans from US President Donald Trump (pictured at the White House yesterday) led to a significant slump in gas and oil prices
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‘But the Government must not lose perspective: bills will still be 52 per cent higher than before the energy crisis and nearly seven million people live in households that have fallen behind on bills.
‘Today’s announcement will be cold comfort to the millions paying off a mountain of debt on top of their monthly costs.
Why you should still consider moving off standard tariffs and onto better deals
MailOnline’s financial expert Simon Lambert, publisher of This is Money, says that although the energy price cap has fallen, households should still consider moving off standard tariffs and onto better deals.
He said: ‘The energy price cap was designed as a backstop to prevent households who didn’t switch energy bills from being hugely overcharged but ended up being a vital protection in the energy crisis, when the ability to find new fixed rate deals vanished.
‘However, that’s not the case anymore. There are a raft of fixed rate energy gas and electricity deals that are much cheaper than the energy price cap and people should seriously consider switching.
‘Not only could you save up to £200 a year on the new price cap, but you will lock in their energy at a lower rate and protect yourself against any potential hikes next autumn and winter.’
This is Money’s regularly updated round-up of the best fixed energy deals that beat the price cap, can help you compare costs.
‘The Government has said it hopes to provide more support to pensioners this winter but we know that people with children are often struggling most of all with energy.
‘It must provide more targeted energy bill support to those hardest hit, and upgrade five million homes with money-saving energy efficiency measures.’
And Simon Francis, coordinator of the End Fuel Poverty Coalition, said: ‘The Government’s reverse ferret on Winter Fuel Payments are a clear sign that ministers know that people are struggling with energy bills – but sticking-plaster solutions and U-turns won’t help people in the long-term.
‘While bills may fall slightly in July, they’re still significantly higher than before the energy crisis and remain tied to the unpredictable cost of fossil fuels.
‘Without urgent reform and real investment, millions will continue to face unaffordable bills and cold homes.’
Which? urged households still on a price cap-linked standard tariff to consider moving to a fixed deal.
Natalie Hitchins, Which? home products and services editor, said: ‘As a rule of thumb, we’d recommend looking for deals cheaper than the price cap, not longer than 12 months and without significant exit fees.
‘If you are on a fixed deal which will be more expensive than the July price cap then it’s worth checking your exit fees and considering switching if you are on a deal with no charges to leave early.’
Richard Neudegg, director of regulation at Uswitch, said: ‘A 7 per cent fall in the price cap from July will reduce the average annual bill by £129 for the millions of customers still sitting on a standard tariff – a welcome break in the clouds in time for summer.
‘But the savings from fixed deals are far bigger than this drop. The cheapest fixed deal could save the average household £203 a year compared with the July price cap.
‘Millions of homes are already paying cheaper rates than the new July cap, after switching to a fixed deal.
‘There are plenty of fixed deals still available that beat both the current and July energy rates. So for households still sitting on a standard tariff linked to the price cap, now is a great moment to lock in fixed savings before the winter gloom returns.’
