At the same time, Ofgem, the energy regulator, has unveiled a new 9% cut to the price cap on household energy bills. This amendment will have far reaching consequences to reshape Britain’s energy landscape. From July through to the end of September, this welcome decision brings down the average yearly dual-fuel bill to £1,683. About 29 million households will gain from this fix. This is a huge £419 reduction from the old rate of £1,849, which was established in April.
Ofgem, the regulator, sets the cap at every three months. They base their prices on a formula that follows wholesale energy market costs and provider network delivery costs. The rapid drop in wholesale gas prices this summer has been blamed on warmer weather and tariffs-induced market uncertainty. Both of these factors have tempered demand expectations, leading to lower short-term inflationary pressures on prices.
The announcement is therefore a welcome relief for households already stretched with the burden of financial crises. In fact, the average household’s annual bill has fallen by an impressive £166. Analysts caution that this decline could be temporary.
Dr. Craig Lowery over at Cornwall Insight warned about the increasing volatility in our energy market.
“We have all seen markets go up as fast as they go down, and the very fact the market dropped so quickly shows how vulnerable it is to geopolitical and market shifts,” – Dr Craig Lowery
He further noted, “There is unfortunately no guarantee that any fall in prices will be sustained, and there is always the risk of the market rebounding.” The cut gives near-term, tangible relief to families. That doesn’t mean they’re out of the woods from facing possible future spikes in their bills.
Analysts have now extrapolated it into the future and are forecasting a “minuscule drop” in the price cap this coming October. They expect a second cut in January 2026. Regardless of these short-term forecasts, experts are calling for long-term solutions to prevent volatility in energy prices. As Dr. Lowery points out, lowering household dependence on international wholesale markets is still critical to keeping households shielded from another round of price spikes in the future.