The head of Britain’s energy regulator warned on Thursday that energy bills are unlikely to fall below pre-crisis levels until at least the middle of the decade.
Jonathan Brierley’s comments came as he announced that the energy price cap, which normally governs what a typical household pays, is set to fall from £3,280 to £2,074 from July.
The sharp decline reflects lower wholesale market prices in recent months thanks to relatively mild weather and efforts to save energy in Europe. However, the new cap is still more than 60 percent higher than the level at the end of 2021, when wholesale energy prices rose in the run-up to Russia’s invasion of Ukraine.
Brierly said he expected electricity and gas prices not to fall much further “in the medium term”. Asked to clarify the timeframe, an official said Brierley meant “at least two years”.
With wholesale energy prices rising last year, the cap, which is reviewed by Ofgem every quarter, peaked at £4,279 in January, compared to £1,277 in October 2021. If the cap falls below this level, it will end Most of the support is for households, which means the average annual bill will drop by £426 from July.
“People should start seeing cheaper energy bills from the beginning of July, and this is a welcome step towards reducing costs,” Brierley said, but added: “In the medium term, it is very unlikely that we will see prices return to the levels we saw before the energy crisis.” “.
He said the regulator, government and industry needed to work on more support for vulnerable families.
The government has ended universal financial assistance for households to offset a sharp rise in energy bills, although those receiving certain welfare benefits are entitled to two more payments of £300 before the end of spring 2024.
The Citizen Advice said the government should consider expanding aid, warning that the continued high cost of gas and electricity is putting pressure on families struggling with the broader impact of high inflation on their budgets.
“For many, life is getting worse, not better. On a yearly basis we break records for the number of people with energy debt. It is clear that more government support will be needed in the future for distressed families.”
Adam Scorer, CEO of fuel poverty charity National Energy Action, agrees. More than two and a half million low-income and vulnerable families no longer receive any government support for unaffordable bills. For them, the energy crisis is far from over.
Energy UK, a trade group representing energy retailers, has warned that a price cap above £2,000 is set to become the “new normal” and backed calls for targeted support for low-income households next winter.
“We also need to move forward with expanding our own sources of clean home energy and making more of our homes energy efficient,” she added, “because that will help permanently lower energy costs for all customers.”
Chancellor Jeremy Hunt told Sky News he was “willing to do what it takes” and increase support for households if energy bills rise again this autumn, although he added there was no expectation of a significant increase in the price cap.
Cornwall Insight, a consultancy, expects the cap to drop to £1,960 in October, rising slightly to £2,026 next January.
Under the July cap, the unit cost of electricity would drop from 51p per kilowatt-hour to 30p and the unit cost of gas from 13p to 8p.
Ofgem also announced that it plans to allow suppliers to increase their profit margin for cap-regulated accounts from 1.9 to 2.4 per cent. The proposal, which is still being consulted until the end of June, is expected to add around £10 to the average bill from October.
Ofgem said the move was necessary to boost financial resilience after rules tightened suppliers’ finances following a series of crashes in late 2021.
