The energy price cap in Great Britain will be reduced by £122 per year, which is equivalent to £1,568 annually for the typical charge.
The latest cap only applies from July to the end of September. Bills are expected to increase again this winter and millions will struggle to heat their homes.
The Monday adjustment reflects lower wholesale costs on the gas and electricity market – however, bills are still over £500 higher per year than they were prior to Russia’s war in Ukraine which shook global energy prices.
National Energy Action (NEA), a British organisation, has estimated that 5.6 million households will still be in fuel poverty this summer, despite lower prices.
Adam Scorer, NEA’s chief executive said: “Any reduction in energy bills in summer is welcome but modest drops in summer are likely to be wiped by larger increases in autumn, when people need to turn on the heating again.”
Analysts at energy consultancy Cornwall Insight predict that the cap on energy prices will rise 10% from October to £1,723 per year, due to wholesale markets rising higher. The company expects the bills to stay at the same level until 2025.
Energy prices will likely remain higher for the remainder of this decade than before the Russian invasion, according to analysts at the Energy and Climate Intelligence Unit.
This conflict has caused Europe to stop importing gas from Russia, its main source of gas. The European market is now more vulnerable to fluctuations in global energy prices as it imports more from the US and Middle East.
Gas prices in Europe were lower early this year, after a mild winter. This allowed energy bills to drop during the summer. The markets are now climbing again due to the stronger demand for gas from Asian economies. This will result in higher energy bills this winter.
Simon Cran-McGreehin is the head of the analysis department at the ECIU. He said that the UK’s high dependency on gas to generate electricity and heat has cost billpayers £2,000 during the current gas crisis and the entire economy tens and tens billions of pounds.
He said that “commonsense measures such as investing in and insulating the most vulnerable homes will make us less susceptible to the whimsy of international gas markets.”
Which?, a consumer group, has urged households to take meter readings as close to 30 June as possible “to ensure you don’t pay over the odds for any energy used after the new price cap takes effect”. The consumer group Which? has advised households to read their meters as soon as possible before 30 June “to avoid paying excessive prices for energy after the new cap comes into effect”.
Scorer stated: “Whoever comes to power on the 5th of July inherits fuel poverty, which causes misery and despair, as well as ill health and premature death. A new government needs a new strategy. Energy can be made affordable with social tariffs. Programmes to help reduce debt. “Energy efficiency programmes to reduce fuel poverty in the homes of those most vulnerable.”
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