Energy price cap fall is a ‘massive relief’ – but bills still remain punishingly high

Millions of UK households will see their energy bills fall this summer, after regulator Ofgem announced a 7% reduction in the energy price cap.

The average annual bill will fall by £129 to £1,720 from July – the first cut to the cap in a year.

Average energy bills continue to be 10% higher (almost £150) than at this time in 2024, and 65% (almost £700) above winter 2020/21 levels.

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The new cap comes into effect from 1 July and reflects a sustained drop in wholesale energy prices.

A fall in the price cap will be welcome news for consumers, said Tim Jarvis, Ofgem’s director general for markets – but people will still be struggling.

“The first thing I want to remind people is that you don’t have to pay the price cap – there are better deals out there so it’s important to shop around, and talk to your existing supplier about the best deal they can offer you,” he said. “And changing your payment method to direct debit or smart pay as you go can save you up to £136.”

Jarvis also called for long-term reform to insulate energy prices from the global gas market and ensure stability through domestic clean energy.

“We need to work with government to unlock the investment needed to meet our clean power and net zero goals as quickly as possible,” he added.

The price cap, introduced in 2019, is reviewed quarterly and limits the maximum unit cost of gas and electricity. It is designed to protect consumers from volatile wholesale prices, though actual bills still vary by usage.

Nearly seven million people are currently behind on their energy bills. Simon Francis, coordinator of the End Fuel Poverty Coalition, said bills remain tied to “the unpredictable cost of fossil fuels”.

Without urgent reform and investment, he warned, “millions will continue to face unaffordable bills and cold homes.”

Francis said the government’s £3.4 billion Warm Homes Plan – which aims to improve energy efficiency in low-income and poorly insulated homes by 2026 – offers a long-term solution. The scheme funds insulation, heat pumps and solar panels to cut bills and emissions. But “media reports and the Whitehall rumour mill suggest the plan is now under threat,” he added. “If ministers walk away, they’re condemning households to years more of hardship.”

 Tessa Khan, founder and executive director of Uplift described the news as a “massive relief” – but stressed the need for the green transition.

“If we follow the money we see there are vested interests who want us hooked on gas and the reality is we have no control whatsoever over its price. While some companies and individuals profit from that reliance, the rest of us are faced with this grinding price cap seesaw.

 “We need to end the system where the price of gas sets the price of electricity. This is what happens most of the time despite our electricity increasingly being generated by cheaper homegrown renewable energy.

“The quicker we get off gas, by switching to renewables and insulating homes, the quicker our energy bills will fall for good.”

National Energy Action chief executive Adam Scorer echoed this concern, warning that bills “remain punishingly high for low-income households”.

“The likely expansion in eligibility for the winter fuel payment will be a relief for some, but National Energy Action is calling for deeper energy bill support and a real focus to support households out of debt.”

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