Energy Bills Set for 7% Reduction as Ofgem Announces New Price Cap
The price most households pay for energy will fall by 7% from April 1, according to an announcement from the regulator Ofgem. This significant reduction is driven by promised government cuts to bills, marking a welcome relief for consumers grappling with high living costs.
Details of the Price Cap Adjustment
Ofgem's price cap will drop from the current £1,758 to £1,641, representing a reduction of £117 annually. For the average household using both electricity and gas, this translates to savings of around £10 per month. The change comes into effect on April 1, 2026, as confirmed by the regulator.
Tim Jarvis, director general of markets at Ofgem, stated: "Today's announcement will be welcome news for many households. Wholesale energy prices have fallen in recent months, and we're investing in our network to safeguard the future energy system. The main driver of today's reduction is the change to policy costs announced by the Chancellor in the budget."
Government Policy and Its Impact
The reduction is lower than the average £150 cut to bills pledged by the Chancellor in November 2025. At that time, the government moved 75% of the cost of the Renewables Obligation from household bills onto general taxation and scrapped the Energy Company Obligation (Eco) scheme.
Analysts at Cornwall Insight noted that the removal of green subsidies would reduce the cap by about £145 a year once VAT and pricing allowances within Ofgem's methodology were considered. However, this decrease has been partially offset by rising network costs, which Ofgem said increased by £66 due to investments in upgrading power and gas grids.
Prime Minister Keir Starmer commented: "Energy bills are at the front of everybody's mind and I know they've been too high for too long. I promised to bring bills down and I meant it. And today, because of the actions this Government took at the last budget, the price cap on energy bills has come down by £117. That means lower energy bills for millions across the country."
Additional Changes and Consumer Considerations
Ofgem also confirmed a decision to move the costs of the Government's separate warm home discount from standing charges to the hourly unit rate of gas and electricity. As a result, standing charges will drop by an average of £13, or 4p a day, for customers using both electricity and gas.
Customers have been advised that the actual cut to their bill will depend on:
- The size and type of household
- How much energy is used
- Those who use more energy are likely to see greater reductions
The government has instructed firms to pass on the savings in full to all customers from April 1, including those already signed up to fixed tariffs.
Industry and Advocacy Responses
Dhara Vyas, chief executive of Energy UK, said: "Today's reduction in the energy price cap is a welcome first step by the Government toward providing meaningful support for households, helping make it more affordable for people to keep their homes safe, comfortable, and warm. While everyone should see savings on their bills from April 1, the effect of moving some policy costs off the gas and electricity unit price will be different."
Dame Clare Moriarty, chief executive of Citizens Advice, added: "A fall in energy prices is welcome but for many people bills remain stubbornly high. For millions of households this has stopped being a temporary hardship and become an ongoing threat to their financial stability. The divide between those who can and cannot keep their homes warm and safe demands urgent action."
Ofgem emphasized its ongoing focus on controlling costs within its remit and supporting investment for a stable energy system. The regulator also noted encouraging signs of greater consumer engagement, with switching increasing by almost 20% year on year.
