Bills lowered for millions of customers as price cap lowered

Utility bills are to fall for millions of customers after Ofgem revealed plans to lower the energy price cap.

The price cap has been lowered by Ofgem.

The regulator said the price cap would be dropped by £75 to £1,179 from 1 October, driven by lower wholesale energy prices.

Up to 15 million customers on standard energy tariff will benefit from the move - however, consumer organisations warned that the price cap is currently £228 more expensive than the top 20 fixed rate tariffs available on the market.

Consumer groups urged householders to shop around for better deals.

Stephen Murray, energy expert at MoneySuperMarket, said: “The cap isn’t even a year old and we’ve already seen three changes in pricing for the 11 million households on expensive standard variable and default tariffs.

“Despite the price cap level dropping by £75, it’s still more than the original level of £1,137 and crucially, there are more than 100 cheaper tariffs available to consumers in the market today."

Last month, the Competition and Markets Authority decided to bring the methodology for calculating the pre-payment cap in line with the default cap.

Following this change, the level of the pre-payment meter cap is higher than the default tariff cap. The pre-payment meter cap now fully reflects the higher cost of providing energy to these customers (incurred by operating pre-pay keys and cards used to top up pre-payment meters).

Dermot Nolan, chief executive of Ofgem, said: “The price caps require suppliers to pass on any savings to customers when their cost to supply electricity and gas falls. 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.

“These customers can be confident that whatever happens, the price they pay for their energy reflects the costs of supplying it. Households can cut their bills further in time for winter, and we would encourage all customers to shop around to get themselves the best deal possible for their energy.”

Matthew Vickers, chief executive at the Energy Ombudsman, said: "This reduction in the price cap is good news, but shouldn’t discourage people from shopping around for better deals.

"When switching to a new supplier, we think it's important that consumers look at the customer service they can expect to receive as well as price."