Millions of households will receive notifications this Wednesday regarding the forthcoming reduction in their energy bills starting in April. Ofgem, the regulatory body, regularly updates its price cap every three months, impacting the bills of the majority of customers on standard variable tariffs.
This time, the update factors in a £150 discount announced by Chancellor Rachel Reeves in the Budget to alleviate the financial strain on consumers. Industry analysts at Cornwall Insight project a decrease of £117 to £1,641 annually for a standard dual fuel household. It is important to note that the price cap sets the maximum rates for energy suppliers per unit of energy and standing charges, with the final bill dependent on individual usage.
Although the anticipated savings were initially touted as £150 per year, the actual average saving for households is closer to £134. Concurrently, additional costs, such as significant increases in electricity standing charges, will impact the overall bill amount. The majority, 98%, of households are expected to see a decrease in their bills, the extent of which will vary based on individual energy consumption.
According to the Resolution Foundation, approximately 7.5 million households will save less than £100, while 6.8 million will benefit by over £200, and 1.8 million by more than £300. The reduction in bills will particularly favor households with higher energy usage, such as those with electric heating or larger families.
The adjustment in rates will disappoint consumers with low energy usage, as the focus is on reducing unit rates rather than standing charges. While there are around 34 million customer accounts on standard variable tariffs, only a portion will be affected by the price cap, as about 21 million are on fixed tariffs.
Following some initial confusion, the government clarified that the announced savings would be applicable to customers on fixed tariffs from April 2026. The most significant impact will be felt in the first year, with some residual effects for three years. Despite ongoing policy changes and additional costs, the Resolution Foundation predicts that annual bills will remain approximately £60 below current levels until 2029.