Household energy bills to fall by £425 as price cap plunges - latest updates (2023)


Household energy bills to fall by £425 as price cap plunges - latest updates (1)

Household energy bills will fall by around £425 a year after Ofgem dropped its energy price cap, making gas and electricity cheaper across Britain.

The price cap has rocketed from £1,162 a year for a typical household in August 2021 to a peak of £4,279 last year following Russia's invasion of Ukraine both pushing up wholesale prices.

The energy regulator today reduced its price cap from £3,280 to £2,074 from July 1.

However, households have already been partly shielded from the most recent rise in prices by the Government's Energy Price Guarantee, which limited annual energy costs to £2,500 for the average household - below Ofgem's price cap.

It means the effect on typical annual energy bills will be a reduction of £426 from £2,500 to £2,074 - a fall of about 17pc.

Ofgem chief executive Jonathan Brearley said: "After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction.

"People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs."

Read the latest updates below.

  • Live Reporting

ByChris Price

Scholz embarrassed as Germany suffers winter recession

Germany suffered a winter recession, fresh data has shown, embarrassing Chancellor Olaf Scholz who ruled out such an event.

First-quarter output in Europe's largest economy shrank 0.3pc from the previous three months following a 0.5pc drop between October and December, the statistics office said. Its initial estimate, last month, was for stagnation.

The result is a setback for Germany, despite escaping the bleakest scenarios feared in the aftermath of Russia's invasion.

Mr Scholz told Bloomberg in January: "I'm absolutely convinced that this will not happen that we are going into a recession. We showed that we are able to react to a very difficult situation."

The culprit is the key manufacturing sector, where a deepening downturn is casting doubt on the rebound many anticipate for the coming quarters.

Indeed, industrial weakness is taking a toll on the business outlook. A gauge of expectations by the Ifo institute fell for the first month in eight in May, while a survey by lobby group DIHK pointed to zero GDP growth for 2023.

A Bundesbank report this week offered some optimism — suggesting the economy may grow "slightly" this quarter as large order backlogs, an easing of supply bottlenecks and lower energy costs support manufacturers.

'That's probably it' on energy bill falls, says Martin Lewis

People may still pay as much for energy this winter as they did last year, Martin Lewis has said.

The founder of the website told BBC Radio 4's Today programme:

For every £100 you pay on energy now you'll likely be paying £80-85 on energy from July. So that is a real manifest drop in energy bills.

The truth is that's probably it. From October it might go down a little bit more but then we expect it to bounce back a bit in January.

And if those are true, the reality is next winter, the winter coming, people will be paying roughly what they did last winter because rates are cheaper but they're not getting the £66-67 a month (state) support.

So things will get slightly better and they'll certainly stop getting worse, but by no means are we getting anything close to what we used to have. People will still be paying double what they used to pay before the energy crisis hit.

Tories could have cut bills with 'proper windfall tax', says Davey

The new Ofgem price cap is "cold comfort" for households under cost-of-living pressures, Liberal Democrat Leader Sir Ed Davey said.

In a statement, he said:

This will offer cold comfort to millions of families struggling with soaring food prices and housing costs.

The Conservative government could have chosen to cut energy bills months ago funded through a proper windfall tax.

Instead Rishi Sunak put bills up while families suffer. It shows he doesn't get it or just doesn't care.

FTSE 100 falls as US default risk grows

Markets have continued their decline as the risk of a US default on its debts draws ever closer.

The FTSE 100 has fallen 0.3pc after the open to 7,603.82 while the FTSE 250 was flat at 18,933.37.

Negotiators for Democratic President Joe Biden and top congressional Republican Kevin McCarthy held what both sides called productive talks on Wednesday to try to reach a deal to raise the United States' $31.4trn debt ceiling and avoid a catastrophic default.

Ofgem hopes 'competitive fixed price' energy deals will return

The situation in the energy market is improving and cheaper deals could soon return, Ofgem chief executive Jonathan Brearley said.

He told BBC Radio 4's Today programme:

What we are seeing though is going back sort of five, six, seven, eight months ago, where we saw the international prices were 10, 15 times their normal price, we are seeing things normalise, we are seeing things stabilise.

And we are very hopeful that we will start to see the competitive fixed price deals re-enter the market. And if we see that, then customers will get a better deal than the price cap.

So we have faced the biggest energy shock in our history, but things are improving.

Cost reductions being passed on more quickly, says Ofgem boss

Mr Brierly continued that it is beyond Ofgem's remit to consider how to support households struggling with soaring bills.

Asked whether the regulator should reduce the energy price cap further to help tackle inequities, the energy regulator's chief executive told the BBC Radio 4's Today programme:

What we do as a regulator is make sure that costs are fairly reflected in the price that we pay and that's what we're doing.

And the good news is the changes we made to the price cap means those cost reductions are being passed through much more quickly than they otherwise would.

There's a much bigger societal debate about how we are going to provide the right support to families who are not just struggling with their energy, they're struggling with many household bills right now.

Now that is beyond the remit of Ofgem, but we are doing everything we can not only to make sure that we support Government in their thinking around that, but also that we implement the schemes that they they put in place.

'Many families will struggle,' admits Ofgem boss

The boss of energy regulator Ofgem has acknowledged that many families will continue to struggle as bills remain high.

Asked about estimates that 6.5m people will still live in fuel poverty under the new price cap, Jonathan Brearley told BBC Radio 4's Today programme:

So the reason why it is still high is ultimately although that drop (in the price of energy) is dramatic, it is not as dramatic as the rises we saw between 2021 and 2022.

Now the market is stabilising and we are seeing signs that, for example, switching may return so we may see better offers even than the price cap.

But ultimately, prices are higher than they were before and you're right, many families will struggle.

Now what we are saying is that that means alongside making sure people pay a fair price, which the price cap does, we the industry and the Government need to work together to support those vulnerable customers.

Cineworld aims to exit bankruptcy in first half of this year

Cineworld has revealed that it has secured further backing from lenders for its restructuring plan, after filing for bankruptcy in the US last year.

The troubled cinema chain said the plan now has support from lenders controlling around 99pc of its legacy lending facilities and at least 69pc of its outstanding debt.

The group is moving forward with plans to restructure its roughly $5bn (£4bn) debt pile in an effort to exit the Chapter 11 bankruptcy during the first half of this year.

Cineworld, which also runs the Picturehouse chain, stressed that it is continuing to run its venues "as usual without interruption".

Pets At Home boosts profits despite energy bill hit

One company looking forward to lower gas and electricity prices is Pets At Home, which has posted better-than-expected annual profits as rising sales helped offset soaring energy bills and higher investment spend.

The group has reported underlying pre-tax profits of £136.4m for the year to March 30, up 4.8pc or 8pc higher on a 52-week basis.

Like-for-like sales jumped 13.4pc across its Vet Group chain, while retail revenues lifted 7.5pc.

The profits leap came despite energy costs soaring by £14.9m and a £5.9m spend on digital investment.

On a reported basis, pre-tax profits fell 17.7pc to £122.5m, after last year's figures were boosted by gains from the sale of its specialist group business, as well as costs of its new Stafford warehouse.

Winter household bills to be double rates in 2020, warn analysts

Despite the cut in average annual energy costs by £426 from July, consultancy firm Cornwall Insight has said households should expect their energy bills to remain stubbornly high through the coming winter, at almost double the rates paid in 2020.

The energy analyst also told consumers to expect prices to remain above pre-pandemic levels for the rest of the decade.

The price cap has rocketed from £1,162 a year for a typical household in August 2021 to as much as £4,279 last year, with the pandemic and Russia's war in Ukraine both pushing up wholesale prices.

Simon Francis, coordinator of the End Fuel Poverty Coalition, said:

The sting in the tail to this announcement is that customers are still going to be paying roughly the same for their energy as last winter.

And after months of inflation and the wider cost of living crisis, people are even less able to afford these high energy bills.

The UK Government needs to use the summer to fix Britain's broken energy system, because for millions of people the energy bills crisis is far from over.

This means ramping up energy efficiency programmes, helping the public with energy debt and reforming energy pricing arrangements so people don't suffer again this winter.

Household bills still 'eye-wateringly high,' says Miliband

Households will continue to struggle as energy bills remain "eye-wateringly high" despite the drop in the energy price cap, shadow climate change secretary Ed Miliband said.

In a statement, the Labour frontbencher said:

Energy bills remain eye-wateringly high, almost double what they were 18 months ago, and families and businesses across the country will continue to struggle to make ends meet.

This is the result of 13 years of Tory energy policy failure, blocking onshore wind, closing our gas storage, and stalling on energy efficiency, which has left our country insecure and vulnerable to high gas prices.

Only Labour has a plan to get bills down and make sure we are never again left so exposed, with a sprint for cheap, clean power by 2030, insulating 19m cold, drafty homes, and establishing GB Energy, our publicly-owned energy company.

Shapps 'relentlessly focused' on reducing UK's fossil fuel needs

The cut to the cap marks the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago, Ofgem said.

Energy Security Secretary Grant Shapps described as "positive" the drop in the energy price cap to £2,074 from July.

In a statement, the Cabinet minister said:

It's positive households across the country will see their energy bills fall by around £430 on average from July, marking a major milestone in our determined efforts to halve inflation.

We've spent billions to protect families when prices rose over the winter covering nearly half a typical household's energy bill, and we're now seeing costs fall even further with wholesale energy prices down by over two thirds since their peak as we've neutralised Putin's blackmail.

I'm relentlessly focused on reducing our reliance on foreign fossil fuels and powering-up Britain from Britain to deliver cheaper, cleaner and more secure energy.

'Prices are moving in the right direction,' says Ofgem boss

After cutting the price cap to £2,074, Ofgem chief executive Jonathan Brearley said:

After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction.

People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.

However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country.

Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.

In the medium term, we're unlikely to see prices return to the levels we saw before the energy crisis, and therefore we believe that it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups.

In particular, we will continue to work with government to look at all options.

Ofgem price cap cut still leaves bills higher than before Putin's energy crisis

The cut to the cap marks the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago, Ofgem said.

At its peak, the price cap reached £4,279 and, "whilst today's level is lower than last quarter, it is still above the levels it was before the energy crisis took hold, meaning many households could still struggle to pay bills", the regulator added.

Ofgem chief executive Jonathan Brearley said more focus will be needed for government, the regulator and the industry to support the most vulnerable groups this winter.

The energy crisis was triggered when Vladimir Putin ordered Russia's invasion of Ukraine, sending wholesale gas prices soaring.

Ofgem price cap reduced to £2,074

Ofgem is lowering its energy price cap from the current £3,280 per year to £2,074 for the average household in England, Wales and Scotland, effective from July 1, it has announced.

It means households will feel the benefit of around a £425 reduction in their bills once the £2,500 energy price guarantee brought in by the Government is taken into account.

Ofgem said the £1,206 reduction to the cap reflected recent falls in wholesale energy prices.

The energy Price Cap will change from 1 July 2023

The new #PriceCap is £2,074

The level is based on typical use of an average household on their supplier’s standard default tariff

It's a cap on energy unit price, not a cap on total bills

More ➡️

— Ofgem (@ofgem) May 25, 2023

Good morning

Ofgem has announced a drop to its energy price cap giving households a boost in the cost-of-living crisis.

The energy regulator reduced its cap to £2,074 from £3,280.

I gives households a boost of £426 on typical annual energy bills after the Government subsidised the cap to leave consumers exposed to £2,500 a year on average.

5 things to start your day

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2) Lack of risk taking in the City threatening the economy, warns Bailey | Bank of England Governor says finance companies too focused on ‘low yielding assets’

3) Why falling inflation is not the good news you think it is | Price rises remain stubborn – spelling trouble for shoppers, homeowners and the Tories

4) Monzo founder quits ‘unfavourable’ London for San Francisco | Banking app founder latest to quit UK as fears grow over tech exodus from the City

5) Britain to win race for Jaguar Land Rover gigafactory | Major boost for car industry as UK beats Spain in race for giant factory

What happened overnight

Former Barclays bank chief Jes Staley has lost his attempt to dismiss JPMorgan’s lawsuit to make him pay if the bank is found liable for its relationship to paedophile Jeffrey Epstein.

The bank faces to suits claiming it knowingly profited from Epstein's sex trafficking. Mr Staley says he had no control over the accounts in question.

House Speaker Kevin McCarthy suggested that Republican and White House negotiators could come to a deal to avoid a US debt default following four hours of meetings.

Asian shares stumbled to a two-month low and the dollar rose as the impasse in negotiations to raise the US debt ceiling sent investors toward safe-haven assets amid worries about the hit to the global economy if Washington defaults.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8pc to 503.93, the lowest since March 21, and was on track for second straight month of losses.

China shares fell 0.5pc while Hong Kong's Hang Seng index tumbled 2pc to their weakest in 2023.

The drop in these two markets weighed on MSCI's Asia ex-Japan index, whose top 10 constituents include Tencent Holdings, Alibaba Group Holding , AIA Group and Meituan.

Tokyo's Nikkei remained an outlier in the region and was up 0.5pc.

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  • UK economy,
  • FTSE 100,
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  • Cost of living crisis,
  • Global economy
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