British regulator Ofgem lowers energy price cap by £117

The UK energy regulator Ofgem has officially approved a reduction in the price cap for domestic consumers. From April 2026, the annual energy price limit for a typical household will fall to its lowest level in nearly two years. This decision will directly affect the bills of around 29 million customers on variable tariffs. The main driver of the changes is a reform announced by Chancellor of the Exchequer Rachel Reeves, which involves moving the costs of supporting renewable energy sources from electricity bills directly into the general tax system. Although the government had promised savings of around £150, the final reduction amount was £117, due to the need to cover rising costs for upgrading the transmission infrastructure. The UK price cap system was introduced in 2019 to protect customers from unjustified price hikes used by dominant energy suppliers against loyal customers. Despite the optimistic news of reductions, experts warn against excessive enthusiasm. Gas and electricity prices remain about £400 higher than before the Russian invasion of Ukraine in 2022. Furthermore, the geopolitical situation, including the potential escalation of armed conflicts, poses a constant threat to supply stability and could lead to renewed wholesale price increases in the second half of the year. The price cap is reviewed quarterly, meaning the current relief is guaranteed only until the end of June. Analysts also point to the record debt of British families to energy companies, which still constitutes a barrier to a full improvement in the financial situation of many households. „This is a positive step that will provide relief for millions of families, but we must stay focused on the long-term resilience of our energy system.” — Chief Executive of the British energy regulator Ofgem In a political context, Prime Minister Keir Starmer is using the price cut to lend credibility to his economic strategy. The government emphasizes that the transition to clean energy has not only climate goals but, above all, economic ones – to permanently lower the cost of living for Britons. However, the opposition and consumer organizations point out that real help for the poorest is still insufficient, especially after the reduction of fuel allowances for pensioners. The coming months will be a test of the effectiveness of Reeves' reform, as the market begins to react to the new rules for funding network charges. In 2022, due to the energy crisis caused by the restriction of gas supplies from Russia, the British government had to allocate billions of pounds to support programs to prevent energy poverty on a mass scale. In the financial sector, the news of lower energy prices coincided with the publication of strong results from the bank HSBC, which supported the FTSE 100 index. The stabilization of business operating costs and the potential increase in consumer purchasing power are interpreted by analysts as signals of an economic recovery in the UK. Nevertheless, a lasting improvement depends on avoiding further external shocks in the energy commodity markets.