Household energy costs are set to decrease by approximately £151 annually as the economic impact of Vladimir Putin’s incursion into Ukraine continues to diminish.
The established cap, which sets a maximum rate suppliers can demand for each unit of gas or electricity they provide, will be reduced to £1,923 starting October 1, a drop from the previous average of £2,074.
While this is lower than the £2,500 households were charged last winter after considering government subsidies, it remains significantly higher than the £1,138 rate from February 2022, prior to Russia’s invasion which disrupted global supply chains.
Even though yearly bills are predicted to decrease, the Resolution Foundation states that seven million homes are likely to face steeper heating costs this winter due to rising standing order fees and the cessation of government financial support.
During the last winter, government initiatives like the Energy Price Guarantee scheme ensured that the average household energy expenditure was £2,500 annually. This meant that the Treasury shouldered the additional costs arising from the price cap, which was at £4,279 in January.
Additionally, the government provided households with a monthly deduction of £66 on their bills.
Ofgem’s chief has cautioned that the energy sector will continue to experience fluctuations for the foreseeable future.
Speaking on BBC Radio 4’s Today programme, Jonathan Brearley said, “I wish I could promise declining prices on this platform, but the reality is that the market remains tight.”
He elaborated that the recent instability in prices was largely triggered by Russia’s decision to pull its gas from international markets due to the Russia-Ukraine conflict. This led to significant price surges last year.
“Although the situation appears more balanced this year with a better gas supply, the market remains strained,” Brearley commented. As an illustration, he mentioned the mere speculation of a strike in a segment of Australia’s energy sector, which led to a 30% price hike. However, with recent news dismissing the possibility of that strike, prices have subsequently dropped.
Brearley concluded by emphasizing that the market’s unpredictability is likely to persist for a while.
