Ofgem price cap – what is happening to my energy bill?

Latest predictions suggest Ofgem will reduce the energy price cap by £117 to £1,641 a year for a typical dual fuel household from April 1 when it makes its announcement on Wednesday.

– What is Ofgem’s price cap?

The energy price cap sets a maximum price that suppliers can charge customers in England, Scotland and Wales for each unit of gas and electricity they use.

It also sets a maximum daily standing charge – the cost of having your home connected to the grid.

The headline price cap figure provided by Ofgem indicates what a household using gas and electricity, and paying by direct debit, can expect to pay if their energy consumption is typical.

It is important to note that it does not limit a home’s total bills because people still pay for the amount of energy they use – so if it is above the average they will pay more, and if it is below they will pay less.

Energy is regulated separately in Northern Ireland.

– What’s changing with my energy bill this time?

The next price cap, which will take effect from April 1, will be the first to reflect Chancellor Rachel Reeves’ promise last November that £150 would be cut from the average household bill.

She is achieving this by shifting 75% of the Renewables Obligation (RO) costs from household energy bills into general taxation, and scrapping the Energy Company Obligation (Eco) scheme introduced by the Tories in government which was funded by bills and designed to tackle fuel poverty by improving housing conditions, but which has been beset with delivery problems.

This will mainly translate through to customer bills by a cut to households’ electricity unit rates, with an expected reduction of around 3.37p per kilowatt hour (kWh) from the previous quarter.

– Why won’t I see a £150 discount on my bill?

The discount will be applied via a lower unit rate rather than a one-off amount.

It should also be stressed that the £150 figure is an average, and amounts will vary based on the size and type of household and how much energy they use.

Also, industry analysts Cornwall Insight have said the changes are likely to reduce the cap by about £145 a year once VAT and other pricing allowances are taken into account.

It added that increases in costs associated with the operation and maintenance of gas and electricity networks, which are paid for from customer bills, have offset part of these savings.

– Do I need to do anything?

Households should look out for information arriving from their suppliers after the price cut is announced, particularly around the rates they pay for each unit of gas and electricity.

This information will be important for those considering switching away from the price cap to a cheaper fixed tariff, and those looking for a new fixed tariff, as comparing unit prices is key to finding a good deal.

– Is now a good time to switch?

It is always worth investigating fixed deals, taking into account any length-of-time obligations that could result in exit fees.

As a rule of thumb, Which? recommends looking for deals cheaper than the price cap (this is where comparing gas and electricity unit rates is important, rather than looking at headline figures), not longer than 12 months and without significant exit fees.

However, the End Fuel Poverty Coalition said it understood that some fixed tariffs will include announced cuts from February 25, and some will not.

It warned that this could make switching and fixing – that is already confusing – “even more difficult to gauge”.

It said households may prefer to wait for the dust to settle on Wednesday’s announcement before signing up to a fixed term deal or changing supplier.

– Are prices going to keep going down, or should we expect increases in the future?

Cornwall Insight currently expects the price cap to remain relatively steady throughout 2026, with a small fall forecast in July.

However, it said these predictions may shift as wholesale markets change and potential policy cost announcements happen.