Energy Prices set to Fall as Ofgem Lowers Cap

Millions of households are set to benefit from cheaper energy as Ofgem, the energy regulator, lowers price caps. 

Energy bills to fall this winter 

Ofgem, or the Office of Gas and Electricity Markets, have the power to set maximum prices suppliers can charge their loyal customers for gas and electricity. This latest cap update will come into effect in October and apply to around 15 million households in Britain who pay their energy bill by direct debit or pre-pay meters, saving them on average £75 a year. CEO of Ofgem, Dermot Nolan, said, ‘this means the energy bills of around 15 million customers on default deals or pre-payment meters will fall this winter to reflect the reduction in cost of the wholesale energy.'

The energy price cap was implemented to protect vulnerable and loyal customers, who don’t want to switch energy supplier, from being overcharged as it makes the companies pass on any savings to their customers. As Ofgem set the cap on how much can be charged for the unit price of electricity and gas, savings will vary depending on how much energy each household uses. From 2019, Ofgem will review this price cap twice a year for those in England, Wales and Scotland (Northern Ireland has its own energy regulator and price cap). 

Save further by switching energy supplier 

Some of the major energy companies believe the pricing policy puts added pressure on their business and a number of smaller suppliers who have gone out of business are blaming the cap for their failure. However, Mr Nolan thinks the caps are working and protecting those people who do not want to switch suppliers. He goes on to point out that ‘it's forced some of the bigger companies to make efficiency savings’ and, as it still allows people to switch, ‘you see lots of other firms in the market’, which diversifies and expands customer choice. 

In spite of the cap, Ofgem still recommends that customers  swap energy supplier regularly in order to find the best deal because there are many cheaper, fixed-rate tariffs that will save them even more then the planned price cut in October. 

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