UK's energy price cap to fall 12.3% as markets 'near normality'

The UK's energy price cap is to fall by 12.3% from April 1 to June 30 to an average GBP1,690/year ($2,141/yr), energy regulator Ofgem said Feb. 23.

The drop of around GBP238/year takes energy bills for around 29 million consumers on standard variable tariffs down to their lowest levels since Russia's invasion of Ukraine in February 2022.

"Ofgem recognises that the cost of living remains high and many customers continue to struggle with their bills as standing charges rise and energy debt reaches a record figure of GBP3.1 billion," the regulator said.

In response, Ofgem has levelized standing charges, removing the premium paid by prepayment meter customers, and allowed a temporary GBP28/year charge under the price cap so suppliers have sufficient funds to support those struggling with energy debt.

It has also decided not to change wholesale cost allowances between October 2022 and September 2023 following a review.

"As we return to something closer to normality we have an opportunity to reset and reframe the energy market to make sure it's ready to protect customers if prices rise again," said Ofgem CEO Jonathan Brearley.

Electricity rates under the latest revision of the price cap are to average 24.50 pence per kWh. Gas rates are to average 6.04 pence per kWh. Combined daily standing charges amount to 91.53 pence per day.

Annual bills in the UK are now down around GBP700/yr since the peak of the crisis, when wholesale power and gas prices spiked to record levels. The energy price cap is revised on a quarterly basis.

Platts, part of S&P Global Commodity Insights, assessed the UK NBP day-ahead gas price at 58 pence/therm Feb. 22, down from August 2022's record 555 p/th.

It assessed the UK day-ahead baseload power price at GBP56.50/MWh, down from December 2022's record GBP660/MWh.