London, United Kingdom. Most British households will see lower energy bills from April after energy regulator Ofgem cut its price cap by 7% under government measures to ease costs. The new cap is set at 1,641 pounds a year for average electricity and gas use.
Price cap reduction and government measures
Ofgem said the main driver of the reduction was a change to policy costs announced by the Chancellor in the budget, according to Tim Jarvis, Director General, Markets, at Ofgem. The move follows plans set out in last year’s budget to shift some renewable energy costs to general taxation and scrap a scheme requiring suppliers to fund measures such as insulation for low-income households.
New cap level and expected savings
The new cap is 117 pounds lower than the level set for January to March. The government said last year it would shift 75% of the cost of the Renewables Obligation, which funds renewable power generation, from consumer bills to general taxation from April.
Changes to supplier-funded support scheme
The government also said it would scrap a scheme requiring energy companies to fund measures such as insulation and new heating systems for low-income households. It said the two measures would remove around 150 pounds a year from average household bills.
Network costs offset part of the drop
Ofgem said soaring network costs have offset some of the savings. While wholesale gas and power prices fell over the past few months, network costs are becoming a larger part of the bill as the network is upgraded.
Transmission upgrade levies added
Network costs rose by 66 pounds compared with the last price cap period as levies associated with a 24 billion pound upgrade to the country’s energy transmission system started to be added.
How will the April price cap change affect your household energy budget?
