Britain’s energy regulator has confirmed household bills will fall by £117 a year from April, a reduction that is £33 short of the £150 saving previously pledged by the Chancellor.
Ofgem announced the typical annual fuel bill under the energy price cap will decrease from April, following a modest fall in wholesale costs and policy adjustments.
Rachel Reeves told households in her November Budget scrapping a scheme introduced by the previous Government and moving certain costs into general taxation would cut bills by £150 a year.
The confirmed reduction of £117 leaves a £33 gap between the Treasury’s earlier commitment and the figure now set by the regulator.
Furthermore, energy bills are still £73 higher now than they were when Labour first came into power.
Danni Hewson, head of financial analysis at AJ Bell, said: “Households can be forgiven for looking at the complicated figures that make up the UK’s energy price cap and wondering why the savings coming their way in April fall short of what the chancellor had promised them in November’s Budget.”
The overall reduction reflects a £38 annual drop in wholesale energy costs combined with Government policy changes, although these have been partially offset by network costs rising by £66 a year.
Mr Hewson said: “Rachel Reeves told people that scrapping a scheme introduced by the previous Government and moving some costs onto general taxation would save them £150 a year.
“Wholesale energy costs have also fallen, albeit slightly, and that might have led people to expect even greater savings on their bills from April. But the total being saved by households on an average dual fuel bill will be just £117 a year.”
The overall reduction reflects a £38 annual drop in wholesale energy costs
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The saving equates to roughly £10 a month for a typical dual fuel household, providing some relief after several years of elevated prices.
Mr Hewson warned that the rising cost of maintaining and upgrading the energy network presents longer-term pressures on bills.
She said: “After the unpleasant heights endured over the past few years, saving £10 a month will be welcome, but the rising cost of maintaining and improving the network is worrying.
“This is especially the case as demand for electricity is set to continue rising as data centres, EVs and households switch away from gas heating and alter the UK’s energy requirements.”
The saving equates to roughly £10 a month
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Households that have already cut their energy consumption significantly may see smaller savings in cash terms compared with higher-usage customers.
Mr Hewson said: “There’s also a potentially bitter pill to swallow for those who have cut their energy usage way back, because it’s those who use the most power that will save the most from the changes.”
High-usage households, including some running medical equipment at home, could see annual reductions exceeding £150 depending on their level of consumption.
Customers who have secured fixed-rate tariffs will be contacted by their energy supplier to explain how policy-related savings will be reflected in their arrangements.
Bills remain substantially above historic norms
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“And looking back at where things stood last year, the price cap is £200 lower and there are potential savings to be had for those who haven’t yet sought out a fixed rate tariff,” Mr Hewson said.
Despite the April reduction, bills remain substantially above historic norms, leaving many households continuing to manage elevated costs.
Mr Hewson said: “But look back further and people are having to deal with the reality that the price cap is staying much higher than historic levels, and for people who have racked up high levels of debt the small moves coming in April won’t bring much relief.”