Millions of households are eagerly awaiting the announcement on Wednesday of the upcoming reduction in their energy bills starting in April. Ofgem, the regulatory body, periodically revises the price cap every three months, affecting a large majority of customers who are on standard variable tariffs.
This time, the adjustment takes into consideration the £150 discount proposed by Chancellor Rachel Reeves in the Budget to alleviate the financial strain on consumers. Industry analysts at Cornwall Insight project that for a typical dual fuel household, the annual bill may decrease by £117 to £1,641. It is crucial to note that the price cap sets the maximum amount energy providers can bill for each unit of energy and the standing charge, with the final bill dependent on individual usage.
Despite the much-publicized £150 yearly saving, the actual average saving for households is estimated to be £134, as other expenses like increased electricity standing charges offset some of the benefits. The majority, 98%, of households are expected to witness a decline in their bills, with the extent of savings contingent on energy consumption patterns.
According to the Resolution Foundation, approximately 7.5 million households are likely to save less than £100, while 6.8 million could save over £200, and 1.8 million may save more than £300. The greatest beneficiaries will be households with higher energy expenditures, such as those with electric heating, larger families, or elevated electricity usage due to medical reasons.
The adjustment primarily targets the unit rate rather than the standing charge, potentially disappointing low energy users who still have to pay the daily fixed charge. While there are around 34 million accounts on standard variable tariffs, including six million with prepayment meters, about 21 million are on fixed tariffs and hence unaffected by Ofgem’s price cap changes.
Clarification was needed regarding how the announced savings from the Budget would be implemented. The government has confirmed that customers on fixed tariffs can expect these savings to be reflected in their bills from April 2026. The initial impact of the reduction will be most significant in the first year but will continue to some extent over three years, gradually diminishing due to policy changes and additional costs.
Despite ongoing adjustments, the Resolution Foundation predicts that annual energy bills are anticipated to remain approximately £60 below current levels until 2029.