The amount most households pay for energy will fall by 7% from April 1, after the regulator lowered its price cap in response to Government-backed changes to the way bills are funded.
The new cap will drop from £1,758 to £1,641, a reduction of £117 a year — or roughly £10 a month — for a typical household using both electricity and gas, which aims to reassure families about ongoing support in managing costs.
The reduction, however, falls short of the £150 average annual saving pledged by the Chancellor in November.
The government’s removal of green energy subsidies, like the Energy Company Obligation (Eco) scheme, directly influences costs and policy changes affecting consumers.
Energy consultancy Cornwall Insight estimated that removing green subsidies would lower the cap by about £145 a year, once VAT and Ofgem’s internal pricing allowances were factored in.
Higher infrastructure costs have partly offset the savings. Ofgem said network charges increased by £66, largely due to investment in upgrading electricity and gas grids, which is essential for a more reliable and sustainable energy system.
These upgrades are intended to modernise the system, improve reliability and support the transition to lower-carbon energy — but they add to the baseline cost built into the cap.
Tim Jarvis, director general of markets at Ofgem, 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.
“Our focus at Ofgem remains on bearing down on the costs within our control, and unlocking the investment needed to support the transition to a more stable energy system over the longer term.
“We’re also seeing encouraging signs of greater engagement and competition, with switching increasing by almost 20% year on year.”
Prime Minister Keir Starmer said: “Energy bills are at the front of everybody’s mind and I know they’ve been too high for too long.
“I promised to bring bills down and I meant it. And today, because of the actions this Government took at the last budget, the price cap on energy bills has come down by £117.
“That means lower energy bills for millions across the country. But 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.”
