Ofgem announces 7% Energy Price Cap drop from July to September

Energy regulator Ofgem has announced a reduction in the energy price cap for the third quarter of 2024 following a fall in wholesale prices.

From July 1st to September 30th, the price cap will fall by 7%, equating to an annual bill of £1,568 for the average household paying by direct debit for dual fuel.

This represents a decrease of £122 compared to the previous quarter.

The average annual energy bill will be £506 cheaper than a year ago from July, thanks to this reduction.

However, while the drop is significant, bills remain higher than pre-COVID-19 pandemic levels.

Before the energy price shock triggered by Russia’s invasion of Ukraine, a standard annual bill was £1,084 in the summer of 2021.

This means that compared to three years ago, energy is costing households an extra £484.

From July 1st to September 30th households using prepayment meters will pay an average of £1,522 annually, while those on standard credit will see an average annual bill of £1,668.

The standing charge for a dual fuel customer remains unchanged at £334, or £369 for those paying by standard credit.

The price cap isn’t a limit on your total bill. The amount of energy you use determines how much you pay. The price cap doesn’t apply to you if you’re signed up to a fixed deal.

Wholesale electricity prices fell to their lowest levels in February, before rising slightly and remaining stable from mid-April, according to energy consultancy Cornwall Insight.

Ofgem takes into account recent changes in wholesale prices when it sets the energy cap.

The price cap is expected to rise slightly in October and fall again in January 2025, according to Cornwall Insight.

While this reduction brings some relief, it is insufficient for many.

National Energy Action (NEA), a fuel poverty charity, reports that 5.6 million UK households will remain in fuel poverty from July, despite the price drop.

Adam Scorer, Chief Executive of NEA, commented on the situation: “Every fall in the price cap is good news. It should make life a little easier for everyone. But for our clients, and for millions of households in fuel poverty, there remains a huge gap between current prices and affordable energy bills.”

“Over 2 million households owe over £3 billion of household energy debt. Millions will still be in negative budgets. Even more will be cut off from basic levels of heat and power.”

Mr Scorer emphasised the need for more comprehensive measures: “Unfortunately, fuel-poor households will not enjoy affordable energy through occasional small changes in the price cap.”

“Whoever wins the next election inherits the responsibility to build fuel poverty out of inefficient homes and build greater protection into the regulation of the energy market.”

Will Owen, energy expert at Uswitch.com, said: “A 7% drop in the energy price cap from July to September is good news for the 28 million households on standard tariffs, who should see bills coming down.

“While this is the lowest price cap we’ve seen in over two years, storm clouds are on the horizon with the cap predicted to rise again in October. This would mean higher rates over the winter, when we use the most energy for heating our homes.

“If you’d prefer to avoid the uncertainty of rising costs in winter, now is a good time to think about taking a fixed energy deal, which would let you lock in rates while prices are cheaper.

“Fixed energy tariffs are the cheapest they’ve been since summer 2021 and there are some great value deals currently worth considering.”