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Ofgem To Cut Energy Price Cap By £17 | Dyball Associates

Matt Olney • February 7, 2020

Ofgem has announced a cut to the energy price cap, but one that is lower than some experts had been expecting.

Price cap cut to benefit 15 million households

The pre-payment meter cap will fall from £1,217 to £1,200 and the default price cap will be reduced from £1,179 to £1,162 in the April-September period.

The main cause for the cut in the caps is down to the continuing drop in wholesale energy prices between August 2019 to January 2020. Healthy supplies of gas and the influx of liquefied natural gas has been a big driver in keeping prices down. Because of this wholesale energy prices are at their lowest levels for 10 years.

“The default price cap is designed to protect consumers who do not switch from overpaying for their energy, whilst encouraging competition in the retail market. Suppliers have been required to become more efficient and pass on savings to consumers.

In its first year, the energy price cap is estimated to have saved consumers £1bn on average on their energy bills and switching rates have hit record levels. Today’s announcement is further good news for the 15 million households covered by both price caps who will see their energy bills fall in April. Households can reduce their energy bills further by shopping around for a better deal,” said Ofgem in a statement.

Cuts not as deep as expected

Many experts had been predicting deeper cuts to the price cap, complaining that Ofgem has failed to catch up with the price war that is raging between energy suppliers.

The increased competition has resulted in a race to the bottom between the big players and challengers as they battle it out to offer the lowest prices to attract more customers.

New data released earlier in the week by Which? Showed that the number of tariffs below £1000 had hit a record high. This fierce competition was the key driver for 2019 breaking records for energy switching.

As usual those consumers who look for the best deals are likely to see the best benefits to their energy bills.

Further Reading -

6 Reasons why Consumers Switch Energy Suppliers

What does 2020 hold for the UK Energy Market?

Ofgem sets out plans to hit net-zero carbon emissions by 2050

Dyball Associates are proud to help new supply businesses successfully launch in the UK market.

Through our energy market consultancy services, and the software we’ve developed, we’re supporting new UK electricity and gas suppliers get set up and start supplying.

For more information on how to start and manage an energy company, get in touch with Dyball Associates today.

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