The UK energy regulator Ofgem has announced a significant reduction in the energy price cap, which will fall by 7% from April 1. The average household in England, Scotland, and Wales will pay £1,641 per year instead of the current £1,758. This decision results from changes to the funding of green levies, which Chancellor Rachel Reeves' government decided to move from consumer bills to the general state budget.

Energy price cap drop

Annual energy bills for a typical household will fall by £117, reaching £1,641 from April.

Policy cost shift

The government shifted the funding of renewable energy sources to the tax system, which is the main cause of the current reduction.

Infrastructure cost impact

Rising costs for maintaining the energy network limited the government's planned reduction from £150 to £117.

Historical price context

Prices are the lowest in nearly two years, but remain significantly higher than pre-energy crisis levels in 2022.

The UK regulatory body Ofgem has officially confirmed a reduction in the energy price cap for households in the UK. From April, this cap will be reduced by £117 per year, representing a 7% drop compared to current rates. This change will affect approximately 29 million customers on variable tariffs. The main factor driving the reduction is a reform of the bill structure, announced by Chancellor Rachel Reeves in the November budget. The government decided to shift the costs of funding renewable energy sources and social programs to the general tax system, which was expected to bring savings of around £150 per year. The final reduction, however, is lower than the promised £150 and amounts to a net £117. This difference is due to rising costs for maintaining and modernizing the UK's energy network, which partially offset the benefits of the fiscal changes. Despite the noticeable relief, bills remain about £400 higher than before the outbreak of the full-scale war in Ukraine. Experts note that current prices are the lowest since July 2024, but they still represent a significant burden on British wallets, especially in the context of high consumer debt to energy suppliers. The energy regulator Ofgem reminds that the announced price cap is not an upper limit on the total bill, but a cap on the price per unit of gas and electricity used and the standing charge. This means that households consuming more energy will still pay higher amounts. These changes are part of Prime Minister Keir Starmer's broader plan, which promised to reduce the cost of living through investments in green energy by 2030. The current price adjustment will be in effect for the second quarter of 2026, with the next cap review to take place in July. The UK energy market was severely destabilized in 2022 following Russia's invasion of Ukraine, which led to a sharp rise in gas prices and forced the government to introduce emergency support programs for citizens. In the opinion of Ofgem representatives, despite the fall in wholesale commodity prices, the market remains vulnerable to geopolitical shocks. Ofgem's Director General, Tim Jarvis, indicated that while the reduction is positive news, the priority remains ensuring energy security and network resilience against future crises. At the same time, there is a noticeable increase in competition among suppliers, manifested in customers switching operators more frequently in search of additional savings.

Mentioned People

  • Rachel Reeves — British Chancellor of the Exchequer, responsible for changes to green levy funding in the budget.
  • Tim Jarvis — Director General for Markets at Ofgem, overseeing the price cap setting process.
  • Keir Starmer — Prime Minister of the United Kingdom, for whom lowering energy bills is one of the government's priorities.