UK energy price bills to rise from April despite fall in cap level: Ofgem

The gas and power bill for a typical British household is due to rise to GBP3,000/year ($3,590/year) from April 1, despite a fall in the regulated cap level, regulator Ofgem said Feb. 27.

For the period April 1-June 30, the energy price cap will be set at an annual level of GBP3,280 for a dual-fuel household paying by direct debit based on typical consumption.

That is down almost GBP1,000 from the current level of GBP4,279 and reflects recent falls in wholesale energy prices, Ofgem said.

However, the GBP3,280 figure only indicates how much consumers on their energy suppliers' basic tariff would pay if the government's Energy Price Guarantee (EPG) were not in place.

From April 1, the government has set the EPG at GBP3,000 for the typical bill, up from GBP2,500 previously, as it scales back help on energy costs.

The energy price cap was introduced by the government and has been in place since January 2019, and Ofgem is required to regularly review the level at which it is set.

Summer prices

Ofgem said the cut in the price cap level from April reflected a "significant" reduction in the cost of buying and providing energy for customers.

"If it continues, it will mean that by the summer, prices paid by consumers will drop for the first time since the global gas crisis took hold more than 18 months ago," it said.

The UK NBP day-ahead gas price has averaged 145 pence/therm since the start of 2023, compared with an average of almost 200 p/th in 2022, according to Platts price assessments by S&P Global Commodity Insights.

It was last assessed on Feb. 24 at 131 p/th.

The NBP day-ahead price rose to a peak of 555.5 p/th in late August as prices across Europe rallied due to winter supply concerns, lower Russian deliveries and high demand for storage injection.

UK day-ahead power was assessed by Platts at GBP147/MWh Feb. 24. The spot contract averaged GBP195.41/MWh for the three-month period up to that date, down just 2.2% compared to the previous three-month period as it included most of winter, S&P Global data showed.

Forward contracts, however, fell sharply with month-ahead halving in value since November with March baseload last assessed by Platts at GBP138.80/MWh.

Annual assessments followed a similar pattern with Cal 2024 at GBP144.90/MWh on Feb. 24 compared with GBP311.36/MWh for Cal 2023 on Nov. 24.

"Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee," Ofgem CEO Jonathan Brearley said.

"This means, that on current policy, bills will rise again in April. I know that for many households this news will be deeply concerning," Brearley said.

Lower wholesale prices

Brearley said the cap price reduction announced Feb. 27 reflected the "fundamental shift" in the cost of wholesale energy for the first time since the gas crisis began.

"And while it won't make an immediate difference to consumers, it's a sign that some of the immense pressure we've seen in the energy markets over the last 18 months may be starting to ease," he said.

Brearley said that if the reduction in wholesale prices continued, "the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower."

"However, prices are unlikely to fall back to the level we saw before the energy crisis," he said.

A spokesperson for the UK Department for Energy Security and Net Zero said Feb. 27 that government support would continue to help households with their energy bills.

"The government has covered around half of the typical household's energy bill this winter, and by the end of June the EPG will have saved a typical household in Great Britain around GBP1,000 since it began in October," the spokesperson said.

"The cost of energy has already been falling and we expect this to drop further over the coming months, which we fully expect suppliers to pass onto their customers," the spokesperson said.

However, the rise in absolute prices was slammed by unions. Unite general secretary Sharon Graham said Ofgem's latest maneuvers on the energy price cap would do "next to nothing" to ease the pressure on workers and communities.

"This out of touch government is clearly preparing to pull the plug on protecting consumers and is totally abdicating any responsibility for dealing with the runaway profiteering of energy companies," Graham said.