Typical UK Energy Bills to Drop 7% to £1,720 from July

Millions of households across Great Britain will see a reduction in their energy costs this summer after Ofgem, the industry regulator, announced a 7% cut to the energy price cap. Starting in July, the average dual-fuel bill is expected to decrease by £129 a year, bringing the total to approximately £1,720 annually.

The cut follows a significant decline in wholesale gas prices across Europe, which has reduced costs for suppliers and allowed Ofgem to lower the cap. This adjustment comes after three consecutive quarterly increases in the cap.

Despite the upcoming decrease, the typical household energy bill remains roughly £600 higher than it was before Russia’s invasion of Ukraine three years ago.

Around 9 million households on variable tariffs will benefit directly from the change. However, actual bills may vary based on usage, as the cap limits the cost per unit of energy rather than setting a total bill amount.

European gas prices have dropped sharply—from nearly €58 (£49) per megawatt-hour in February to just over €31/MWh recently. Similarly, UK gas prices have fallen from 138p to 78p per therm. This drop not only reduces heating costs but also impacts electricity prices, as gas-fired power plants make up a significant portion of the UK’s electricity supply.

The updated cap may reignite concerns about energy affordability. Government data recently revealed that a record number of UK households were unable to pay their energy bills via direct debit last month due to insufficient funds.

More than 2.7% of gas and electricity direct debit payments failed in April due to a lack of funds, according to the latest data from the Office for National Statistics.

The growing number of payment defaults is likely to push overall energy debt even higher. By the end of September last year, total energy arrears had already hit a record £3.8 billion—more than twice the amount owed by households at the beginning of 2022.