The energy regulator has lowered its price cap, meaning household bills will fall - Jacob King/PA
Energy bills are to fall by £129 from July, regulators have announced, easing pressure on British households after three consecutive increases.
Ofgem, the energy regulator, has set its price cap – the amount suppliers are allowed to charge their customers – at £1,720 per year, falling from its current cap of £1,849.
It follows three consecutive increases in bills that have heaped pressure on consumers and driven the rate of inflation up. Ofgem changes its price cap every three months.
Energy industry analysts at Cornwall Insight this week predicted that another “modest drop” would follow in October, with another to come in January.
The fall in household’s bills comes after Donald Trump’s trade war hammered gas and oil prices as uncertainty over tariffs weighed on prices.
At the same time, Opec cartel members have been pushing through oil production increases, adding further downwards pressure.
Dr Craig Lowrey, of Cornwall Insight, said on Friday: “This fall in the energy price cap is undoubtedly welcome news for households, offering a degree of relief at a time when many are grappling with high living costs, and rising inflation.
“Lower prices in the warmer months are helpful, but the real benefit could come in October. With energy use typically rising as we head into winter, any drop in bills later in the year would be especially valuable for families trying to manage the high costs in the lead up to the Christmas period.”
However, he warned that the energy market “remains unpredictable”.
He said: “We know recent declines in wholesale prices have helped bring the cap down, but global events - from geopolitical negotiations to shifts in trade and weather - can quickly reverse that trend.
“Plus, even with the cap coming down, bills are still higher than what we used to consider ‘normal’, so support is still very much needed.”
It comes as worries are mounting over the amount of historical debt racked up by British households as prices soared in recent years. The total amount of debt and arrears owed to suppliers hit £3.8bn at the end of 2024.
Tim Jarvis, the director general of markets at Ofgem, said on Friday that the regulator was looking at ways it could address historical debts.
He told BBC Radio 4’s Today Programme: “We have to get on top of that number. It has been increasing significantly over the last year or two, as people have been struggling with their bills.
“And it’s a problem, not just for those people who are in debt... and the stress that it causes, but it’s something that we all pay for in our prices.”
Sharon Graham, the general secretary of Unite, said: “Ofgem has lowered its cap, but our bills are still sky high and nobody has any faith left in this regulator, which allows multinational companies to extract obscene profits from our energy system.
“We urgently need to reverse the market madness and address the real causes of the lingering energy crisis.”
That bills are set to fall – and are expected to fall further over the months to come – will come as a relief to the Prime Minister, who pledged to ease the burden of energy bills before he was elected last year.
However, they are still 10pc higher than they were when Labour took office. Sir Keir Starmer this week said he would review Labour’s clampdown on winter fuel payments, in a major u-turn on what has been one of his government’s most unpopular policies.
Adam Scorer, chief executive of National Energy Action, said household bills still remained “punishingly high”.
He said: “Four years of extraordinarily high energy bills has taken its toll. We hear heart-breaking cases every day.”
Read the latest updates below.
10:27 AM BST
Signing off...
That’s all from us on the energy price cap this morning.
This chart shows the extent of households’ energy debt and arrears up to the end of last year. Ofgem’s director general Tim Jarvis said this morning that the regulator is looking at ways to tackle the issue.
09:32 AM BST
Older people face ‘unrelenting’ pressure from bills
Here’s Caroline Abrahams, of the charity Age UK:
“This fall in energy prices will not undo the hardship many older people have already endured and may have to endure again this winter. Despite relatively mild weather, last winter was especially tough for pensioners who lost their Winter Fuel Payment. Pensioners, many of whom live on fixed incomes, have faced impossible choices between heating their homes and covering other essential expenses.”
08:43 AM BST
Price cap fall ‘will have minimal impact on debt-laden households’
Soaring energy bills have plunged swathes of households into debt in recent years, with the total amount owed to suppliers surging to almost £4bn, according to Ofgem data.
Richard Lane, of debt charity StepChange, said: “This is the first fall in the energy price cap we’ve seen for a year, but it’s fair to say it’ll have a minimal impact, both on the households already struggling to meet these costs and for those already deep in the red with their energy bills – many of whom have been hit hard by other bill rises in April.”
08:36 AM BST
FTSE 100 edges higher as markets open
The benchmark index was up 0.3pc in early trading as Ofgem lowered its price cap for households and government data showed an unexpected jump in retail sales.
The mid-cap FTSE 250 index climbed 0.2pc after markets opened.
08:31 AM BST
Relief for Starmer as energy cap falls
During his election campaign last year, Sir Keir Starmer pledged to bring down customers’ bills after they soared to record highs, so the news on Friday that households can expect them to drop in July after months of pain will come as a relief to the Prime Minister.
However, it is likely to remain a critical issue over the months to come because bills are still more expensive than they were at the time of Labour’s election victory.
Danni Hewson, head of financial analysis at investment firm AJ Bell, said: “The 7pc drop wipes out April’s increase, but the cap is still higher than it was during the same period last year and there’s no sign of energy prices falling back to historic norms.
It comes after Sir Keir this week said he would review Labour’s clampdown on winter fuel payments, in a major u-turn on what has been one of his government’s most unpopular policies.
Joanna Elsom, chief executive of Independent Age, said: “We heard dreadful accounts of people going to bed in hats and coats, limiting themselves to just one meal a day to save money, and having to visit public places to stay warm.
“We urge the UK Government to act quickly and provide clarity on who will be eligible for the next payment.”
07:54 AM BST
No faith in regulator to help struggling households, says Unite
Here’s Sharon Graham, the general secretary of Unite, the union.
“Ofgem has lowered its cap, but our bills are still sky high and nobody has any faith left in this regulator, which allows multinational companies to extract obscene profits from our energy system.
07:39 AM BST
Miliband: Labour ‘doing everything we can’ on high bills
The energy secretary, Ed Milband, welcomed news of the price cap falling, arguing it would mean “that working people keep more of their money in the coming months”.
“We know that it is only through our mission for clean home-grown 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.
Energy secretary Ed Miliband welcomed the fall in Ofgem’s price cap - Wiktor Szymanowicz/Future Publishing
07:28 AM BST
‘Harder to argue for renewables’ if gas keeps getting cheaper
Simon Virley, head of energy and natural resources at KPMG, said the falling price of gas could make it “harder to argue” for switching to renewables.
He said:“Today’s decrease in the energy price cap is the result of falling gas prices and will bring costs back to where they were at the end of last year. This is good news for households still struggling with the cost of living.
“With upward pressures on the cost of renewables, due to supply chain and other constraints, if gas prices continue to fall, it will be harder to argue that switching from gas to renewables will help bring energy bills down in the near term.”
07:25 AM BST
Energy UK boss: Britain is too dependent on gas
Here’s Dhara Vyas, chief executive of Energy UK, a trade body which represents the energy industry.
“Today’s announcement again underlines how energy bills are driven by the country’s dependence on gas and a wholesale price over which we have little control - and which has risen more often than fallen in recent times.
07:23 AM BST
Ofgem considering scheme to tackle historical energy debt
Tim Jarvis told The Today Programme Ofgem is looking at ways it can help households with historical debt that they have built up as prices soared in recent years.
Around £4bn is currently owed to energy suppliers in arrears.
Mr Jarvis said: “We have to get on top of that number. It has been increasing significantly over the last year or two, as people have been struggling with their bills.
“And it’s a problem, not just for those people who are in debt... and the stress that it causes, but it’s something that we all pay for in our prices.”
07:18 AM BST
Ofgem boss: ‘We do recognise that many people are still struggling’
Ofgem’s director general for markets, Tim Jarvis, told The Today Programme this morning: “We do recognise that many people are still struggling, and there’s a lot of volatility that the changes in prices as a result of these changes in international markets.
“It does make this market difficult. So I would encourage people to try and try and switch and protect themselves from these fluctuations.”
He insisted the regulator was doing what it could to help ease pressure on British households, adding that customers struggling to meet their bills should open talks with their suppliers.
“Often it’s the last thing [people] want to do but talk to your supplier, because there is help available. They can make sure that you are paying the cheapest amount.”
07:10 AM BST
Relief on bills ‘likely to be short-lived’
Tessa Khan, founder of fuel poverty charity Uplift, said: “Any reduction in household energy bills is a massive relief for millions across the country but is sadly likely to be short lived. What racks up UK energy bills is our high dependency on exorbitant gas prices.
“If we follow the money we see there are vested interests who want us hooked on gas and the reality is we have no control whatsoever over its price. While some companies and individuals profit from that reliance, the rest of us are faced with this grinding price cap seesaw.”
06:57 AM BST
Good morning
Household energy bills are poised to fall after Ofgem reduced its price cap by 7pc.
On Wall Street, the Dow Jones Industrial Average rose 0.4pc, to 42,037.60, the S&P 500 rose 0.5pc, to 5,873.50, and the Nasdaq Composite rose 0.9pc, to 19,049.21.
In the bond market, the yield on benchmark 10-year US Treasury notes fell to 4.540pc from 4.588pc a day earlier.
