Energy Bills: energy bills to fall in April in price cap change and charges shake-up
Typical household energy bills will fall by 7% in April after a government shake-up of charges and a change to the price cap. The reduction will cut the annual combined gas and electricity bill for a typical household to £1, 641, a fall of £117 from the current cap.
What Energy Bills change means
The 7% reduction in the price cap is the biggest drop since last summer and will apply from April for the three months ahead. For millions on variable tariffs governed by the price cap, the change will be about £10 a month for households using a typical amount of gas and electricity. For a household governed by the regulator's price cap and using a typical amount of energy, the annual bill will fall by £117 to £1, 641; under the current January–March cap it stands at £1, 758.
How the price cap shifts
The cap fall follows government moves announced in a recent budget and an Autumn Budget commitment to take an average of £150 off the costs of energy bills from April. That £150 pledge was made by the chancellor and included ending funding for the Energy Company Obligation scheme and removing 75% of costs for the Renewables Obligation scheme from household energy bills. Changes to policy costs are the main driver of the reduction, although rising network costs have offset some of that promised saving.
Who gains and who loses
Nearly everyone in England, Wales and Scotland will benefit from the cut irrespective of their tariff, but individual savings will vary by household size, type and energy use. The cap is based on a "typical household" using 11, 500 kWh of gas and 2, 700 kWh of electricity a year with a single bill for gas and electricity, settled by direct debit. The discount will be applied primarily through a lower price per unit of electricity, so high electricity users — which may include vulnerable households using medical equipment — are likely to see the biggest benefit. Households that use little electricity and a lot of gas will benefit the least.
Policy changes and taxes
The chancellor said the measures would take an average of £150 off household energy bills by scrapping the Energy Company Obligation (Eco) scheme introduced by the Conservatives and moving some charges onto general taxation. That shift and the removal of a large share of the Renewables Obligation costs from bills mean many consumers will see part of the saving from reduced policy costs. The government announced that billpayers would start benefitting from an average of £150 off the costs of energy bills from April onwards, and that customers do not need to do anything to claim the savings; they will be automatically applied from 1 April onwards. For energy used after 1 April, the savings will be applied to the unit rate for gas and electricity.
Payments, timelines and suppliers
About 40% of homes are on fixed deals. The changes to policy costs will also mean a reduction in bills for those on fixed deals; suppliers are expected to contact customers on fixed tariffs in the coming weeks about the specific change to their tariff. The regulator has enforcement powers if suppliers fail to pass on savings to fixed-deal customers. Some smaller energy suppliers were never part of the Energy Company Obligation scheme, meaning their customers have already benefitted from not paying those costs.
Officials say that without government intervention the price cap would have risen in April. The adjustment comes as the cost of maintaining and strengthening energy networks — including power lines, cables and gas pipes — increases; network charges rose by £66 from the last cap and are adding roughly £6 a month for a typical household, diluting the headline saving. Without intervention, energy bills for all households would have climbed for a fourth consecutive quarter despite falls in wholesale markets.
Domestic energy prices remain about a third higher than before the war in Ukraine, and the situation has pushed energy debts to record levels. Higher bills have persisted in part because gas market prices remain inflated due to the cost of importing more gas by tanker from the US and the Middle East, and also because of the higher costs of the UK’s energy transition.
Chancellor Rachel Reeves said: "we're beginning to turn a corner, " adding the government was "putting more money in people's pockets, " and improving public services. The Conservative shadow energy secretary Claire Coutinho said Labour was "pulling the wool over people's eyes by moving some costs off of your energy bill and putting them straight onto your tax bill. " Keir Starmer said on Wednesday: "I know there is more to do and my government is pulling every lever to bear down on the cost of living and protect the pound in the pockets of working people. "
Tim Jarvis, director general of markets at the regulator, said: "Today's announcement will be welcome news for many households. Wholesale energy prices have fallen in recent months, and we're investing in our network to safeguard the future energy system. The main driver of today's reduction is the change to policy costs announced by the chancellor in the budget. " Peter Smith, a director at National Energy Action, said: "Any fall in sky-high energy bills is welcome. But the new level is still far from affordable. Those on the lowest incomes in the leakiest homes will face deep debt and will still struggle to stay warm and well at home. " Clare Moriarty, chief executive of Citizens Advice, said: "A fall in energy prices is welcome but for many people bills remain stubbornly high. " She added that for millions of households this had stopped being a temporary hardship and become an ongoing threat to their financial — unclear in the provided context.
For households on variable tariffs governed by the price cap who use a typical amount of gas and electricity, the monthly drop of about £10 reflects the £117 annual reduction. The regulator's cap covers around 29 million household customers and will limit the amount suppliers can charge per unit of gas and electricity for the next cap period starting in April.
The regulator and government say the package will cut costs for many households from 1 April, but the final effect for any individual will depend on their tariff, their energy use and whether they are on a fixed deal or a variable price-cap tariff.
