Energy bills will fall by £238 a year from April as Ofgem confirms price cap drop

The average household energy bill will soon fall by £238 to £1,690 a year, as regulator Ofgem today confirmed its price cap for April 2024.

The price cap limits the maximum amount an energy firm can charge for the units of gas and electricity consumers use, as well as daily standing charges.

Ofgem said the current £1,928-a-year average price-capped bill would fall by 12.3 per cent.

The current price cap sets the energy bills paid by more than 80 per cent of UK homes, though the exact amount varies depending on gas and electricity use.

The headline price cap figure applies to households on variable-rate tariff energy deals paying by direct debit.

The April average price cap will run for three months until it is reset again in July 2024. 

Why is the Ofgem price cap so important? 

The price cap was brought in during January 2019 to stop energy firms overcharging customers on variable-rate tariffs.

Most households had fixed-rate energy deals at the time, and only moved onto variable-rate tariffs if they did not renew at the end of their term.

But after energy bills began rising in late 2021, gas and electricity companies responded by pulling all new fixed-rate deals from the market.

They did they to try to avoid the widespread collapse that affected many energy firms, which were suddenly being forced to sell power for far less than it cost them to buy it.

Because cheap fixed-rate deals had almost disappeared, almost all homes ended up on variable tariffs regulated by the Ofgem price cap.

What is the future for energy bills?

The price cap is then reset in July and once again in October.

Cornwall Insight thinks the average gas and electricity bill will fall again to £1,465.07 in July, before rising to £1,523.95 in October.

When will cheap fixed energy deals come back?

A big question for consumers is whether lower, more stable energy bills could encourage energy firms to bring back cheap fixed-rate deals.

Fixed-rate tariffs have historically been far cheaper than variable rates, but dried up once energy prices began soaring in late 2021.

While energy companies have started relaunching fixed rate energy deals, many are more expensive than staying on the price cap, or only available to existing customers.