Energy prices to fall for millions as Ofgem lowers cap

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The price of energy is set to fall for millions of British households this October after the regulator, Ofgem, lowered price caps.

Ofgem sets maximum prices that can be charged for gas and electricity to those who have not switched suppliers and are on default tariffs.

The new cap could see these households typically pay £75 less a year.

The regulator attributed the fall to lower wholesale energy prices.

Ofgem boss Dermot Nolan 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.”

About 11 million households are on default, or standard variable tariffs, and are set to be affected. Such a household, which uses a typical amount of energy and pays the bill by direct debit, should now expect to pay £1,179 a year.

Consumer groups say they can shop around for a better deal.

Another four million people are on prepayment meters, so pay for their energy in advance. The price cap will fall on their tariffs too, with the typical customer paying £1,217 per year, down £25 from the previous cap level.

How do these caps work?

Energy price capping, brought in under Theresa May, is designed to protect the vulnerable and those who have stayed loyal to their energy supplier.

Ofgem sets the cap for households in England, Wales and Scotland. Northern Ireland has a separate energy regulator and its own price cap.

The regulator sets a cap on the unit price of energy for electricity and gas, and a maximum standing charge.

Energy companies are not allowed to charge default tariffs that are higher than these thresholds.

The first cap came into force at the start of January. Ofgem said this price limit meant households typically saved £76 a year on what they would have been charged without the cap.



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