Energy price cap to fall to £1,923, says Ofgem
The energy price cap for households in Great Britain is to fall to £1,923 a year for the usage of a typical household, according to energy regulator Ofgem.
The new average figure will apply from October to December. It is expected to rise again for January.
The cap, which does not apply to Northern Ireland, was set at £2,074 for July to September.
Key events
A third of English households to face higher bills this winter – Resolution Foundation
Over one-in-three households across England – 7.2m in total – will face higher bills this winter than last, according to the Resolution Foundation, a thinktank.
The lower price cap for October to December is – at £1,923 – lower than the effective cap of £2,100 last winter (when taking into account £400 of extra support from government). However, while the price per unit of energy is falling, this will be offset by a rise in the daily standing charge and the end of the £400 universal payments, the Foundation said.
The people who lose out will be concentrated in the poorest households. 47 per cent of England’s poorest tenth of households will face higher bills.
One-in-eight households (13%, equivalent to 2.8m households) will see winter energy bills increasing by £100 or more this year, rising to almost a quarter (24%) of those in the poorest tenth of families.
Jonny Marshall, senior economist at the Resolution Foundation, said:
Falling wholesale gas prices have finally brought the energy price cap down below £2,000. However, this is still over 50 per cent higher than families were used to before Russia invaded Ukraine, while the end of the £400 universal payments and rising standing charges mean that over one-in-three families across England will face higher bills this winter than last.
With almost three million households set to see their bills rise by over £100 – at a time when inflation is still sky high – the government must up its game in providing longer-term support for hard-pressed families with a new social tariff for energy bills.
And here are the main points of the Competition and Markets Authority’s study on housebuilders:
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Estate management charges – concerns that private housing estates can have high or uncapped charges for owners for basic amenities such as roads and street lighting.
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Land banks – the practice of buying large amounts of land to keep for years before building has led to “concerns from some stakeholders this may be limiting competition or slowing build-out rates in some areas”.
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Planning rules – overly complex planning rules are hindering development.
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Regional competition – whether there is enough competition in various parts of the UK.
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Barriers to new builders – including access to land to build on.
That adds up to quite a sweeping study – and one which will be scrutinised particularly closely by big housebuilders with significant land banks.
The findings are due in the autumn.
UK competition regulator to probe British housing sector
It is a busy morning for the UK’s business regulators: the Competition and Markets Authority (CMA) has announced not one but two studies on British housing.
The regulator has said it will look into concerns that housebuilders’ strategy of buying and holding of land may be anti-competitive, and concerns over the unfair treatment of tenants in the private rented sector.
There is a fairly long list of places the regulator is looking – and it has not made any findings yet. Nevertheless, the studies will make many in the housing industry hot under the collar.
Here are the main points for the rental sector:
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Zero deposit schemes – concerns over pressure selling and undisclosed commissions by lettings agents.
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Sham licences – some landlords are not recognising consumers’ rights under tenancies.
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Onerous guarantee clauses – forcing tenants to come up with extensive evidence of assets.
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Possible unlawful discrimination – including banning housing benefit claimants – the infamous “no-DSS” clause.
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Fees charged on retirement housing.
Here is some of the political reaction to the new energy price cap:
Labour shadow energy secretary Ed Miliband says high energy prices in Great Britain – which are still far above the £1,277 price cap set in October 2021 – can be blamed on UK government energy policy:
These figures demonstrate the scandalous Tory cost of living crisis is still raging for millions of people. 13 years of failed Tory energy policy has left Britain as the most exposed economy in Western Europe to the effects of Putin’s war. https://t.co/PpcrWHo8rt
— Ed Miliband (@Ed_Miliband) August 25, 2023
Grant Shapps, the government’s energy security secretary, said:
It’s encouraging families will see their energy bills continue to fall from October, down £580 on average since their peak – another milestone as we deliver on our promise to halve inflation.
We acted swiftly when prices soared because of Putin’s abhorrent attack on Ukraine, spending billions and covering around half a typical household’s bill.
And we are successfully driving Putin out of global energy markets so he can never again hold us to ransom, and we are boosting our energy independence to deliver cheaper, cleaner and more secure energy to British homes.
Brearley has defended rises in standing charges, which pay for energy infrastructure, but which are charged even if a household uses no energy.
He said:
If we take money off that fixed charge and we put it into the price per unit, then poor households that have high energy needs are made a lot worse off.
It was a marginal change for most customers, but some people with high energy needs, such as families with disabled children, would be worse hit, Brearley said.
Asked about social tariffs, which would charge less to poorer households, Brearley said:
We support that being in the mix of the options we might examine.
Ultimately that is a decision for government. I have to accept as a regulator, I don’t have to think about the fiscal position. I don’t have to think about all the pressures on families.
‘Many families are going to struggle’ – energy regulator
Brearley said many families are going to struggle. He said:
That is way higher than the price before the crisis. Many many families are going to struggle.
He said there are alternative options to the price cap, such as regulating differently for different companies.
Jonathan Brearley has told BBC radio’s Today programme the price cap drop is a “welcome relief for households”, and “an actual drop in the cost of energy”.
He said:
I would love to come on this show and tell you prices are going to fall, but the truth is markets are still tight.
The situation is much more stable this year. We have a lot more gas available.
But the market is still tight.
Things are going to be volatile for some time to come.
Ofgem says the price cap is the lowest level since October 2021.
Ofgem says:
[It] reflects further falls in wholesale energy prices, as the market stabilises and suppliers return to a healthier financial position after four years of loss making.
Jonathan Brearley, Ofgem’s chief executive, said:
It is welcome news that the price cap continues to fall, however, we know people are struggling with the wider cost of living challenges and I can’t offer any certainty that things will ease this winter.
That’s why we’ve introduced new measures to support consumers including reducing costs for those on pre-payment meters, and introducing a PPM code of conduct that all suppliers need to meet before they restart installation of any mandatory PPMs.
There are signs that the financial outlook for suppliers is stabilising and reasonable profits are returning. With the small additional allowance we’ve made to Earnings Before Interest and Tax (EBIT), this means there should be no excuses for suppliers not to be doing all they can to support their customers this winter, and to reinforce this we’ll be introducing a consumer code of conduct which we will look to have in place by winter. This code will ensure there are clear expectations of supplier behaviours especially for their most vulnerable consumers with whom suppliers should be reaching out proactively, with compassion and understanding. There are great examples of suppliers already doing this but I want to see this become the norm in such an essential sector that has such a big impact on people’s lives.
Here’s Ofgem’s announcement (delivered to the stock market this morning):
The change will bring the average dual-fuel energy bill below £2,000 a year for the first time since April 2022, saving households an average of £151 on the previous quarter.
From 1 October – 31 December, the cap will be set at an annual level of £1,923 for a dual fuel household paying by direct debit based on the current typical domestic consumption values (TDCV) rate.
Energy price cap to fall to £1,923, says Ofgem
The energy price cap for households in Great Britain is to fall to £1,923 a year for the usage of a typical household, according to energy regulator Ofgem.
The new average figure will apply from October to December. It is expected to rise again for January.
The cap, which does not apply to Northern Ireland, was set at £2,074 for July to September.
Ofgem to announce energy price cap for Great British households
UK energy regulator Ofgem is expected to cut the price cap for households in Great Britain, in an announcement due at 7am BST.
The cap, which limits what suppliers can charge per unit of gas and electricity, fell on 1 July to the equivalent of £2,074 a year for the usage of a typical household. The cap does not apply to Northern Ireland.
Analysts at Cornwall Insight have forecast the cap will fall to an average of £1,823 a year from October.
The Resolution Foundation shows in this graph how the maximum household energy price has moved during the energy crisis. Note the energy price guarantee, which took over from the price cap temporarily as prices surged last winter.
However, bills could rise again from January, depending on wholesale prices charged to UK suppliers. European gas prices rose significantly in recent weeks because of planned strikes at an Australian gas facility. The company and the workers agreed a deal on Thursday, prompting European gas prices to drop back.
Cornwall Insight predicted the cap could rise to an average of £1,979 in January.
The agenda
7am BST: Ofgem energy price cap announcement
9am BST: Germany Ifo business climate index (August; previous: 87.3 points; consensus: 86.7)
3:05pm BST: Federal Reserve chair Jerome Powell speech at Jackson Hole
