Equivalent to an annual saving of £122, the cut will take effect from July and run for at least three months.  The regulator evidences continuing falls in wholesale gas prices as behind its latest cut.

The cap assumes unchanged standing charges amounting to £334 across both fuels, or £369 for clients settling retrospective bills.  The controversial billing elements endure, with Ofgem resisting campaigners’ calls for them to be merged into consumption costs.

Suppliers may offer a lower standing charge for their default tariffs under the price cap. But to raise the unit rate above that assumed in Ofgem’s price cap, they need to demonstrate that the overall amount charged to consumers is at or below the total price cap.

For the first time, Ofgem today broke down numbers of all Britain’s domestic customers by the way they pay, and the class of tariff on which they are billed.

As of April, around 28 million customers were on Standard Variable Tariffs (SVT). Of these, around 18 million paid by direct debit and 5 million by standard credit, ie. variable bills settled by customer-controlled payments.

That left around of SVT customers feeding pre-payment meters (PPMs). The total of customers on fixed tariffs stands at 4 million, the vast majority of them not on PPMs.

Observers were split as to whether the tariff reduction  would endure beyond September.  Supplier E.ON Next was first to respond, announcing a reduced rate on its tracker E.ON Next Pledge’ tariff which could save switchers a further annualised £50 for customers transferring over from July.

But respected analysts Cornwall Insight said enduring volatility in wholesale prices meant were likely to push tariffs up again this winter.

Principal consultant Craig Lowrey called for politicians and Ofgem to continue on their reform consultations around the cap’s design, and work to secure longer term mechanisms designed to speed up delivery of Net Zero and thus of price stability,

“It is clear the cap in its current form is not going to bring down bills to pre-crisis levels”, Lowrey observed.

“However, while the general election is likely to put a halt to any immediate reforms to household energy bills, parties may use this opportunity to highlight how they intend to approach this challenge in the future”.

From infrastructure advocates Britain Remade, director Sam Richards noted: “The prospect of the Energy Price Cap falling …will deliver relief for households that have had to endure eye-watering energy bills for far too long.

“But energy bills still remain far higher than the long-term average”, Richards went on. “The only way to rapidly bring bills down is to turbocharge the building of clean sources of secure domestic energy.

“Whether it is new nuclear power stations, onshore or offshore wind farms or utility scale solar, the time it takes to build the clean energy infrastructure we need is unnecessary, unjustifiable and is holding Britain back.”

Anti-poverty campaigners Citizens Advice said the cut would give households only ‘small comfort’ in the teeth of continuing cost-of-living pressures.

Its chief executive Dame Clare Moriarty noted;  “The fall in the energy price cap reduces bills slightly, but our data tells us millions have fallen into the red or are unable to cover their essential costs every month.

“People cannot rely on lower energy prices alone to escape the financial issues they’ve been experiencing. That’s why we need better targeted energy bill support for those really struggling to keep the lights on or cook a hot meal.”

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The regulator has given industry players including suppliers & consumer protection bodies until 11 June to comment on its proposals to re-introduce so-called ‘acquisition-only tariffs’.

The consultation follows Ofgem’s  recent measures taken to protect consumers – including via a series of rising or falling caps guiding retail tariffs – from rampaging inflation in energy prices. These have been caused by the world’s emergence from Covid lockdowns, and by the neo-fascist Putin’s rapacious aggression since 2022 towards Ukraine.

So-called ‘acquisition-only’ tariffs, available only to new accounts and not to existing customers, have been banned by Ofgem since April 2022, in an effort to stabilise prices in unstable, post-Covid markets. The ban was first extended until March last year, and then until March 2024.

At the end of February, Ofgem announced it would use its existing powers to extend the ban for a further thirteen months, hinting the latest extension would be the last. At the same time, the regulator said it would sound out industry opinion on whether to remove the ban as early as this October, assuming its retail price caps remain in force.  The alternative is to leave the ban in place until March next year.

Permitting suppliers to re-launch aggressive customer-recruiting tariffs this autumn, is flagged in the consultation as Ofgem’s preference.  An early lift will yield, the body expects will a faster return to competition between suppliers on both price and service factors,

The proposals set out Ofgem’s evaluations of each scenario’s impact on efficient competition in retail energy.

Early response from participants included an argument for retention from Citizens’ Advice, the government’s statutory and independent advisor on fuel poverty.

“Keeping the ban in place is a no-brainer“, Gillian Cooper, CA’s energy director commented.  “It prevents suppliers from locking loyal customers out of their cheapest deals.

“Ofgem must resist pressure to scrap it and ensure suppliers are proactively keeping customers up to date about their cheapest deals.

Removing the ban would unfairly hit older and disabled consumers the hardest, said the CA spokesperson, as they are less likely to switch to a new supplier.

“The ban also protects millions of people with energy debt, whose suppliers can block them from switching, as it means they don’t have to stay on the most expensive tariffs pushing them even further into the red.

At Britain’s biggest supplier Octopus Energy, director of regulation Rachel Fletcher agreed.

 “Allowing suppliers to block their best deals from loyal customers would be a return to the ‘Wild West’ of the energy industry”, she said.

“The loyalty penalty was a key reason 30 energy companies went bust, and ended up adding billions of pounds on to energy bills. Ofgem was right to ban these unsustainable Del Boy tactics, and it would be crazy to bring them back now”, Fletcher went on.

“Instead we need a more transparent, fairer market where suppliers are forced to compete based on innovation, customer service and efficiency. We need lower prices for everyone, not just the few.”

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As UK energy prices begin to fall – on 1 April the new price cap of £1,690 takes effect, down from £2,382 for the same period last year, – Ofgem makes public changes in its approach to ensure consumers are protected as the pace of change accelerates on Britain’s journey to Net Zero by 2050.

The regulator frames its mission under five priorities:

• Shaping a retail market that works for consumers
• Enabling infrastructure for Net Zero at pace
• Establishing an efficient, fair and flexible energy system
• Advancing decarbonisation through low carbon energy & social schemes
• Strengthening the regulator as an organisation

Last week the National Grid Electricity System Operator (ESO) predicted the nation’s electricity demand could grow by over 50% by 2035, as more sectors such as transport and heating use more electricity.

Ofgem’s strategy re-vamp follows appointment in September of its new chair, Mark McAllister, pictured, formerly the head of nuclear regulator the ONR. New directors have also joined contributing expertise in customer service, engineering, economic regulation, digital services and business.

McAllister said price shocks in recent years surpassed anything he had seen in his 45-year energy career.

“As things start to stabilise, now is the time to shift our focus forward to building a cleaner, more secure and affordable energy system that will help to deliver a net zero future for generations to come, while ensuring we are not susceptible to similar shocks again” he said.

Officials recognise Britain’s need for renewables-friendly infrastructure signal network upgrades delivered at a rate unseen for decades. But the task brings opportunities and benefits for customers, McAllister added.

Centrepiece of the agency’s national drive is the agency’s new Accelerated Strategic Transmission Investment (ASTI) framework, designed to weed out redundant network projects, thus axing years off connection waits afflicting renewables & storage sources, including 50GW of extra offshore wind.   Two projects, including the 2GW Anglo-Scots EGL1 subsea connector, received provisional approval under ASTI this month.

In November Ofgem unveiled too a network of regional energy planning roles, intended to improve local power planning and speeding up roll-out of new infrastructure.

Ofgem has also put in place new consumer standards requiring energy suppliers to be more proactive in identifying and helping customers at risk of struggling with bills and published a major call for input on debt and affordability to consider how to find a lasting solution to the issue.

It is seeking views on reform of the retail price cap, reflecting the role of dynamic and time-off-use tariffing seen as essential to accommodate a more dynamic power market.

McAllister added: “Our intention is to use our vantage point to bring together all parts of the sector, providing constructive challenge and working in partnership to realise the benefits of the new energy system for the whole of society.”

Ofgem CEO Jonathan Brearley added:  “We are now at a pivotal moment as we look ahead to a huge transformation of how we use our energy, how it’s getting to our homes and how it’s created in the first place.  This means potentially a huge range of possibilities for consumers – smarter tariffs, more energy efficient homes and ultimately more affordable bills.

“Getting there will not be easy, but it is necessary and we must ensure we bring the public along with us as we make this transition”.

Alongside its strategy to 2029, the regulator also releases its detailed Forward Work Programme (FWP) covering twelve months ahead.  From next year the FWP will update the longer-term strategy and the progress it has made towards its objectives, adding metrics to assess progress.

Read the Multiyear Strategy here.

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Ofgem defends the price cap as working well since its introduction in 2019, protecting customers from the worst of volatile, post-Ukraine wholesale power markets.  Reformulations have included a temporary ban on acquisition-only tariffs, stopping suppliers from penalising inattentive customers.

Around half of UK homes were covered by the price cap when it launched.  Bills rocketing in consequence of Covid & of Putin’s war in Ukraine have pushed that share to over 90 per cent now.

The watchdog says a power sector increasingly dominated by renewables and smart technologies favouring flexible, time-shifted consumption, are already speeding up changes in home usage behaviours.  Growing numbers of homeowners generating onsite, operating  batteries, charging EVs or using heat pumps more and more call the cap’s present scope into question.

With waves of households set to adopt time-of-use tariffs, the watchdog says devising a universal price cap is getting trickier for policy makers as much as suppliers.

Half hourly settlement set to arrive next year as an option for home consumers will inject yet more variety into how Britain’s residences use electricity, the body recognises.

Ofgem’s discussion paper today on the future of price protection follows D-ESNZ’s call in February for evidence (CFE) on default tariffs.

The regulator’s suggested options for the price cap’s evolution include:

• making it more dynamic, capping time-of-use unit rates to encourage consumer flexibility
• introducing a targeted cap, reflecting factors such as customers’ financial vulnerability
• opting for more market-based protection, such as setting a limit between a supplier’s default tariff and other rates
• capping suppliers’ profit margins, or
• replacing the cap with a ban on acquisition-only tariffs

Today’s consultation ends on 6 May.  Its proposals are part of Ofgem’s wider work to review how the retail market for home energy is set up, ensuring it favours all consumers including those who struggle the most to meet bills which have trebled or worse since Britain emerged in 2021 from Covid.

Last month the watchdog issued its call for input to examine issues around affordability and debt in the energy market.  It is also reviewing 30,000 responses to a call for opinions on standing charges which closed in January.

Ofgem’s director of retail Tim Jarvis said: “While the price cap played an important role in protecting consumers from the loyalty penalty that existed before its introduction, the energy market is changing as we move to Net Zero. We recognise the systems we have in place may need to change too.

“We’re considering how a wide range of future consumers will use and pay for energy, to make sure we develop the right measures that will protect and benefit consumers across the board.  Our aim is ensure the market works for everyone”.

In related assessments, Ofgem will review over the next two years whether its supervising rules need to levelise bad debt charges between direct debit and standard credit customers. Also flagged for review are changes in suppliers’ operating costs and how these are reflected in the price-cap level.

In February D-ESNZ published its own appeal for input, exploring how default tariffs may evolve as the market changes.

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Ofgem’s raising of the energy price cap enabled British Gas, with 7.5 million domestic customers the nation’s biggest power supplier to homes, to recoup some of the costs of having to sell its output below wholesale prices during the energy crisis.  Centrica puts the costs recovered at £500 million.

The price cap rise, and subsequent increase in British Gas profits, pushed Centrica’s pre-tax profit to £6.5bn for 2023, compared with a loss of £240m a year earlier. The company’s preferred figure, which allows for bespoke adjustments, show profits fell 17% to £2.8bn for the year to December.

Centrica chief executive Chris O’Shea said efforts to recoup costs supported British Gas profits only in the first half of the year, with the division taking a £200m hit in the final six months of 2023.

He defended the remaining profits, which enabled Centrica to pay a final dividend worth £144m to its shareholders.

“I said this before and I want to take this opportunity to say it again: to be sustainable you must make a profit. Which is super important because every consumer in the UK is paying £88 for the failure of other energy suppliers in the last few years. If more companies fail, these costs go on to customer bills.”

The final dividend brings Centrica’s one-off payouts to investors to £217m this year. Centrica said it was also voluntarily putting aside £40m to support customers, on top of the £100m spent in 2023.

By mid-morning, its share price had advanced over 2%, increasing the company’s value to £7,218 billion.

O’Shea said the company’s strong performance was unlikely to last but he was confident shareholders would continue to reap rewards.

“As you would expect, sharply lower commodity prices and reduced volatility will naturally lower earnings in comparison to 2023 as we return to a more normalised environment,” he said.

“Our performance over the past year has reinforced our confidence in delivering against our medium-term sustainable profit ambitions and continuing to create value for shareholders.”

The sharp increase in British Gas profits prompted a backlash from the union Unite, which is calling for the company to be nationalised.

“Centrica is still raking in astonishingly high profits off the back of exorbitant energy bills that are nearly double what they were three years ago, Unite’s general secretary, Sharon Graham, said.

“There is no point beating around the bush: the only way to stop households and businesses being ripped off by the profiteers in our energy supply chain is public ownership. It is an absolutely affordable option that would protect the national interest. Our politicians need to decide whose side they are on and make the right choices.”

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Ofgem director Jonathan Brearley attributed the 5% rise – equivalent to £95 over a year – to continuing fluctuations on electricity wholesale markets, resulting almost entirely from Russian dictator Putin’s assault on Ukraine in February 2022.

The price cap, updated every quarter, sets a notional maximum that can be charged to customers for energy bills.

Brearley insisted that suppliers should take pains to support billpayers facing difficulties.

“This is a difficult time for many people“, he said, “and any increase in bills will be worrying“.

The Ofgem boss drew comfort from what he called a return of choice to home energy tariffs.

“Customers could benefit from shopping around with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap“, he said.

The regulator has acted to raise standards of customer service and worked with suppliers and consumer groups to encourage industry to support those struggling with their bills, including the Winter 2023  Voluntary Debt Commitment  recently announced by Energy UK and Citizens Advice.

The regulator has also published today a statutory consultation on levelling standing charges for prepayment meter and direct debit customers so customers pay the same daily charge.

Previously, customers on prepayment have been charged more than those who pay by direct debit to cover the additional costs and resources required by suppliers to provide their services.

In October 2022, the government introduced measures to temporarily remove this ‘PPM premium’ via the Energy Price Guarantee, which remains in place until April 2024.

Anti-poverty advisors Citizens Advice echoed Ofgem’s call for suppliers to do more to support struggling account-holders.

Gillian Cooper, the charity’s director of energy, said:  “Prices going up during the coldest part of the year will make life harder for millions of people who are already struggling.

“We’re already helping record numbers with energy debt and we’re seeing more people than ever who can’t afford to top up their prepayment meter“.

She criticised chancellor Jeremy Hunt’s neglect of fuel poverty in yesterday’s Autumn Statement “The government missed the opportunity to announce extra support for households who desperately need it this winter. The lack of action means far too many households will now be forced to choose between heating and eating this winter“.

“We urgently need the government to honour its commitment to look at options for providing targeted financial support with energy bills from April 2024.”

At analysts Cornwall Insight, Dr Craig Lowrey noted today’s rise is a reverse on optimism twelve months ago that stability might be returning to world markets for power.

“With little in the way of direct energy bill support coming out of the Autumn Statement”,  Lowrey noted, “consumers are likely to look at lowering usage to counteract high bills, which remain well above their historic averages.

“As we move into 2024, it’s not just the persistently high unit costs that will be a worry; the looming rise in electricity standing charges from April adds another layer to the equation“.

Standing charges for both gas and electricity already account for 16% of average household bills, the Cornwall Insight expert observed.

“Fundamentally the solution extends beyond tweaking energy bills,“ Lowrey went on. “We need a long-term strategy that reduces our dependence on imports of energy, particularly gas. By investing in domestic renewable energy sources, we can start to break free from the international market fluctuations and stabilise our energy prices for homes and businesses alike.”

Sam Richards, founder of pro-growth campaign group Britain Remade, echoed the Cornwall analyst: “As winter sets in, the prospect of the Energy Price Cap increasing by £94 will be worrying news for millions of households up and down the country who are still facing eye-wateringly high energy bills.

“The only way to rapidly bring bills down is to turbocharge the roll-out of clean secure sources of domestic energy.

“The government should start by making sure new onshore wind farms in England can actually get built – unlocking one of the cheapest sources of energy available“.

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That’s the forecast of analysts Cornwall Insight, in a latest prediction reflecting the labrynthine global interdependencies of energy economics.

Growing volatility in international wholesale energy markets has already pushed up forecasts for the 2024 UK price cap for home supply, or the Default Tariff Cap, as regulator Ofgem terms it.

The analysis firm says latest predictions place a typical dual fuel consumer’s January energy bill at £1,923 per year, based on Ofgem’s new official yearly usage benchmarks of 2,700 kWh of electricity and 11,500 kWh of gas. A near-negligible rise to £1,929 is foreseen in April 2024.

While already predicted to increase in January, the cap had been expected to fall below the current £1,834 typical bill rate for the rest of 2024, Cornwall notes.

Figure 1: Cornwall Insight’s Default Tariff Cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer)

Source: Cornwall Insight

Uncertainties such as Israel’s war with Hamas, and the disruptions in Finland and Australia have put paid to those hopes. Since September, forecasts for the cap have nudged up by as much as 6%  Best current forecasts have the price cap remain above the current level at least until the end of the year.

Cornwall notes that Britain’s increasing reliance on internationally sourced liquid gas, as it moves away from Russian supplies, has made it particularly susceptible to flutters in the LNG market.

The ramifications of events in Gaza, which caused production to cease at key Israeli gas fields, saw lower gas output to Egypt where it is processed into LNG, impacting supply and prices. In Australia, strikes have cut production, reducing LNG exports and affecting some of the country’s main assets.

While unrelated to the Gaza conflict, Finland’s Balticconnector experienced interruptions which raised questions about the potential for similar damage elsewhere.  Global wholesale markets have reacted as they rationally should, Cornwall notes, once again pushing up prices.

“The uncertainty over potential disruption going into winter will raise more questions over the supply-demand balance as temperatures start to decline”, in Cornwall Insight’s view.

Dr Craig Lowrey, principal consultant at the respected firm, observed:

“The jump in price cap predictions since September has once again highlighted the vulnerability of UK energy prices – and customer bills – to geopolitical events. The Russian invasion of Ukraine demonstrated there is a delicate balance in the global energy market which can easily be disrupted by unexpected events, it looks as though the current situation is repeating that pattern.

“The government needs to take steps to proactively limit the impact that such situations have on the UK’s energy market, and already stretched households, rather than reacting to events as they occur. Stop-gap measures such as social tariffs and one-off payments are helpful, but they are not a long-term solution”, Lowrey advised.

“While the UK will never be entirely protected from global price increases, reducing the country’s reliance on imported energy and prioritising sustainable, domestically sourced energy will help protect the country from international energy shocks, and work to stabilise prices over the next decade.”

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Currently boss of the Office of Nuclear Regulation, former theology student McAllister will begin work on November 6, as his predecessor Martin Cave leaves after five years.

With 40 years’ experience in energy, McAllister takes charge of the regulator’s strategic direction as it seeks to build an energy market fit for the future.  Reform of markets, incentivising third-party players such as flex aggregators, rationalising charging structures for grid reinforcement, and ending the scandal of decadal waits for connections which now face new generators, all weigh heavily in McAllister’s bulging in-tray.

Responsible for protecting consumers from high energy bills, restoring confidence and resilience in the retail market, and supporting progress towards Net Zero, his leadership will help shape Ofgem’s work in years ahead.

McAllister will also work closely with the government to support more households to move towards cleaner, cheaper energy generated in the UK.

Energy secretary Claire Coutinho greeted the regulator’s confirmation:  “I am pleased Mark is set to take up the position of Ofgem chair, bringing outstanding experience in the energy industry to the role.

“By working together with Ofgem”, the minister went on, “we will continue to ensure the energy market works for consumers, delivering lower bills and cleaner energy – with prices already down 55 per cent since their peak.”

McAllister, pictured, said: “Energy prices, security of supply and decarbonisation of the energy system are some of the most important challenges facing the UK today and which Ofgem plays a key role in addressing.

“I am looking forward to working with the new Board, management and entire Ofgem team to protect energy consumers and to help realise a net zero energy system through both our regulatory and delivery responsibilities.

“I am keen to engage with all stakeholders, including industry, consumer groups and charities to find the best solutions to the challenges we face together.”

Mark Foy, ONR’s chief executive and chief nuclear inspector, paid tribute to his departing colleague: “Since joining us in 2019, Mark has always played a leading role within ONR and had very proactive involvement in our Board level interactions with industry duty-holders.

“He quickly established himself as a trusted and influential figure with fellow regulators, government, and industry.  We wish him well in his new role and thank him for his significant contribution to ONR.”

Two weeks ago, the government strengthened Ofgem’s board with five new appointments. Joining McAllister are

• Warren Buckley, outgoing chair of Citizens Advice
• Alena Kozakova, director at E.CA Economics
• Graham Mather, president of the Infrastructure Forum
• Jonathan Kini, non-executive director at utlitiies regulator Ofwat
• Dr Tony Curzon Price, a former advisor at Cabinet Office and Number 10, and at D-BEIS, predecessor to D-ESNZ

The government continues this winter to offer targeted support for home energy bills. Measures including £150 for over three million households through the Warm Home Discount, alongside Winter Fuel and Cold Weather payments.

This comes on top of £900 cost of living support for those in need, as well as nearly £40 billion to cover around half a typical household’s energy bill last winter.

Working in conjunction with the Ofgem price cap, the government’s Energy Price Guarantee also remains in place until March 2024.

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Critics pointed out that notionally average bills still stand at levels more than £200 higher than before first Covid then Putin’s assault on Ukraine threw world energy markets into turmoil.

The fall to £1,923 represents a 7% drop on the existing cap.  Analysts Cornwall Insight explained that the regulator had altered its means of calculating typical household volumes, the notional Typical Domestic Consumption Value  (TDCV). Under its assumptions of lower consumption volumes, the cap will amount to annual bills for average households approximately £100 per year less.

Dr Craig Lowrey, principal consultant at Cornwall Insight said: “While this modest drop in the cap won’t make a substantial difference to household energy bills, it is encouraging that prices from October are moving in the right direction.

“Unfortunately, Cornwall Insight’s predictions for 2024 show prices continuing to languish well above pre-pandemic prices – something which is currently forecast to remain the case for the remainder of the decade.

Lowrey cited threatened strikes at Australia’s LNG compressing plants as underscoring  Europe’s exposure to upward pressures on global markets.

He called for greater government attention to protecting Britain’s vulnerable bill players, pointing out a mass programme of home insulation could result in lower bills.

“Protection of the vulnerable must be a primary concern, and the introduction of social tariffs such as those already in place for water and telecommunications remains an option”, the Cornwall expert opined.

Interviewed on Radio 4’s “Today”, energy minister Andrew Bowie said proposals for a social tariff were out to consultations via Ofgem.  He defended government measures such as Rishi Sunak’s temporary, reluctantly imposed tax on excess energy company profits.

From Citizens Advice, the nation’s statutory advisor on fighting the fuel poverty now afflicting 6.3 million households, up nearly two million since 2021, criticism of the lowered cap was withering.

Gillian Cooper, the body’s head of energy policy, said “Well before the winter hits, we’re already helping record numbers of people behind on their energy bills.

“Today’s price cap announcement will do little to change that. Typical households are still facing sky-high energy costs, now that support schemes have come to an end.

“Increasing numbers of people we help are in a negative budget, where they simply don’t have enough money coming in to cover even just their essential bills”, Cooper added.

“The next few months will push households like these over the edge. Our data suggests it will be as bad, if not worse, than last winter.

“Government must step in quickly with more targeted support for the households who need it most.“

A robust defence of the price cap came from Greg Jackson, co-founder of Octopus, Britain’s third biggest home energy supplier.

“The energy price cap has been one of the most effective policies to improve retail energy. Initially, it drove efficiency programmes because companies could no longer pass on bloated costs to consumers. Then it cushioned the impact of the energy crisis, buying crucial time for the government to implement support programmes.

“It’s now forcing energy companies to pass on falling wholesales costs rather than pocketing profits. It protected customers – especially older and more vulnerable ones – from the loyalty penalty, and helped bring an end to the wild west of cowboy companies who sold at unsustainable prices leaving everyone to pick up the tab when they inevitably failed.”

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As the reforms’ centrepiece, Ofgem launched

• A market review of supply to businesses & non-domestic users. Covered are:
• Practical steps in stiffening protection for purchasers in pricing & contract behaviour, strengthening competition & safeguarding certain types of non-domestic consumers.

The review of supply to enterprises seeks to end sharp practice among suppliers charging so-called deemed contract rates, i.e.  overcharging business users not under contract, or bending rules laid down in applying the government’s Energy Bill Relief Scheme (EBRS). Clamping down on abuse of security deposits and on fixed price contracts, and shortening the intervals imposed by bad landlords on commercial tenants when switching suppliers, are also targeted.

On topics needing an extension of its powers, Ofgem will also consult on

• Introducing better complaint handling between suppliers & businesses. The agency’s review heard suppliers often fall short in respect of service to enterprise customers.
• Extending micro-business protections to all businesses, so energy bills spell out more clearly fees paid to brokers & intermediaries. Businesses should be allowed too to resolve disputes through a redress scheme.
• Creating better guidance over ‘deemed contract rates’ between customers who have not yet agreed contractual terms with a supplier to avoid problems like overcharging.

Ofgem’s powers in energy supply to enterprises are more limited than in home supply.  So it is asking government for further power in protection, such as over energy brokers.

Businesses now must have access too to the independent energy ombudsman, Ofgem believes, just as householders do in deciding disputes.

Further details here. Businesses & commercial energy purchasers have until September 6 to respond.

Also mooted in Ofgem’s package are:

• New minimum capital requirements for balance sheets of domestic energy suppliers. After the 2021-22 fiasco which saw over 25 home suppliers go bust, Ofgem today is raising the minimum cash reserves which domestic suppliers will need to retain their licence.
• From April 2025, for every equivalent customer on a dual fuel tariff, a capital floor of £0 and a capital target of £115 will apply, assessed against the adjusted net assets on a supplier’s balance sheet
• The agency also seeks new powers to compel suppliers to ringfence against insolvency some or all of customers’ credit balances, when deemed to be in the public interest
• For vulnerable domestic consumers on non-domestic contracts – occupants of care homes & social housing and in mobile home parks, for example – additional protections need to be extended.

Included in the measures is a consultation on better standards of consumer care. Customer satisfaction with energy firms has plummeted since 2018, the agency notes, particularly among home billpayers. Among Ofgem’s specifics;

• Customer service phone lines must stay open longer, into evenings & weekends. Additional contact methods such as email, webchat or other digital-based platforms must be offered.
• Emergency round-the-clock personal support must be available to customers whose power or gas is cut off due to problems originating with their supplier, such as meter faults.

“Suppliers are short-changing too many of their customers, who deserve better”, said Ofgem director Neil Lawrence.

“Energy users need more support when they are struggling and should be able to contact their supplier without frustration or undue delay when they need help.

“The plans we are announcing put the welfare of business and domestic consumers first and set out a comprehensive package to tackle poor behaviour by energy suppliers”, the Ofgem official observed.

For the Federation of Small Businesses, policy chair Tina McKenzie said Ofgem’s steps reflected the FSB’s intended “blend and extend” reforms to energy contracts.

Backing the package, the FSB’s policy head declared: “Small firms have been waiting for measures that could help alleviate the soaring energy costs and address the heavy-handed approach of energy suppliers.

”The Federation is pleased to see today’s publication of the non-domestic market review”, McKenzie went on.

“We have been calling for a ‘blend and extend’ contract renegotiation for small businesses who fixed their tariffs during market peak last year. We’re glad to see the energy regulator has backed our call and again urge suppliers to step up, act with fairness and adapt.

“While a handful of energy suppliers have adopted our ‘blend and extend’ proposals, small businesses have been complaining to us that they were excluded from the renegotiation because they secured contracts through a third-party broker”.

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Leaving Britain exposed to repeats of the last two years of rocketing wholesale gas prices will imperil the economy, says the Office for Budget Responsibility, and put the country in breach of legal obligations.

Abandoning the Net Zero targets adopted by the Johnson administration could result, in a likely scenario where gas prices remain at current levels in the 2020s, in Britain losing between 2 and  3 per cent of GDP this decade, the body advises.

Such a recession would happen if short-term protections to industrial and domestic bill payers such as the energy price guarantee were maintained.

The tough predictions come in the OBR’s annual report on UK fiscal risk and its relation to sustainability.  The advisors’ insistence on Net Zero’s enduring worth will meet opposition from vocal criticism from Tory right-wingers, including Jacob Rees-Moog, briefly industry secretary of state under Liz Truss.

The thirteen-fold rise in the price of gas traded on global markets since Putin’s February 2022 invasion of Ukraine has contributed to wind and solar for the first time being cheaper in most big economies than gas as a power generation, the OBR document notes.

Though dropping back steeply throughout last year as the invasion faltered, the price of gas available to British wholesale buyers stood at around £1.10 per therm this spring, over double the 50 pence it had stood at for most the decade before February 2022. The OBR foresees no further fall this decade.

In the two years to 2022 alone, the UK’s wind generation capacity advanced 11 per cent, and installed solar by 4 percent, the economists note, against 8 per cent and 22 per cent respectively for the EU.

Despite the lifetime cost of renewable electricity being now lower than gas generation, those figures lead the OBR to bemoan “little sign of a step-change in renewable energy investment in the UK following the recent gas price spike”.

Away from power generation, Britain’s switchover to electricity as a source of heat is advancing slowly, says the report, due to a skills gap and a lack of viable alternatives.

Two years ago the OBR estimated that total public investment in the transition to net zero by 2050 might be around £327 billion over the next 30 years (in 2019 prices). £25.4 billion of that would come over the four years to 2025, it believed.

The Government has so far committed less, the equivalent of £22.5 billion, the OBR notes.

Planned investment by the Treasury of £3.8 billion in the power sector is higher than the £2.4 billion assumed in our central scenario. And in its energy security strategy the Government has set out plans to develop up to eight more nuclear reactors.

By contrast, the Government’s planned investment of £8.6 billion in decarbonising buildings is below the £10.9 billion assumed in the OBR’s scenario.

Heat pumps as a replacement for home and industrial gas boilers for example, are being installed at less than ten per cent of the rate needed to  meet the government’s target of 600,000 home pumps operating by 2028.

Read the OBR report here.

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The move stands to save consumers a notional £426 annually, even as the cap replaces the Energy Price Guarantee, the government’s emergency subsidy. Since October that has pegged a hypothetical average household’s annual bill at £2,500 a year.

Ministers and the regulator stressed that the cap’s reduction will mean customers on default tariffs paying less for energy for the first time since global gas prices rose in late 2021, driven by world demand rebounding after Covid lockdowns.   Sanctions on Russian gas after the February 2022 Ukraine invasion further tightened the upward screw.

Falling wholesale prices of gas have enabled the regulator’s decision.

It also heralds likely renewed competition between suppliers, offering competitive fixed price deals for the first time since the energy crisis began.

Business and enterprise users remain cushioned only by the Energy Bills Discount. Its support was revised downwards in April from the more generous Energy Bill Relief scheme.

At its peak, Ofgem’s domestic cap had stood at £4,729.  With the new cap still more than double its pre-Covid levels, the regulator warned though that many households would struggle to meet even lower bills.

Ofgem chief executive Jonathan Brearley said more focus will be needed for government, the regulator and the industry to support the most vulnerable groups this winter.

He added: “After a difficult winter for consumers it is encouraging to see signs that the market is stabilising and prices are moving in the right direction.

“However, we know people are still finding it hard, the cost-of-living crisis continues and these bills will still be troubling many people up and down the country. Where people are struggling, we urge them to contact their supplier who will be able to offer a range of support, such as payment plans or access to hardship funds.

In the medium term the Ofgem boss foresees no return to retail energy prices paid before the crisis first bit in 2021.

“We believe it is imperative that government, Ofgem, consumer groups and the wider industry work together to support vulnerable groups.

Anti-poverty campaigners stressed that the reduction left many homes still facing eat-or-heat dilemmas every day.  The charity National Energy Action said it would still leave 7.5 million households in fuel poverty, unable to heat homes adequately.  In October 2021, that figure stood at 4.5 million.

Citizens Advice, identified in law as representing consumers on energy prices, was equally wary. Its head Dame Clare Moriarty pointed out the cap’s cut to £2,074 is nearly double what average domestic bills were as recently as 18 months ago.

“The fall in the price cap provides some desperately needed respite”, said Moriarty. “But energy bills will still be unaffordable for millions of households”.

“For many, life is getting worse, not better. Year on year we’re breaking records for the number of people struggling with energy debt.  It’s clear more government support will be needed in the future for struggling households.”

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July sees a return to relevance of the regulator’s price cap, as months of protection provided by the government’s Energy Price Guarantee is withdrawn.

“Despite the cap falling from the sky-high prices of the past two years, the figure remains over £1,000 per year more than the price cap levels seen prior to the pandemic”, say the advisors.

“We do not currently expect bills to return to pre-2020 levels before the end of the decade at the earliest”.

The respected consultancy’s predictions are a fall from the April cap, a nominal £3,280 for the typical household.

Its latest figure is calculated following the closure of the observation window last week. That’s the period Ofgem uses to calculate the wholesale element in the cap.

Two major consultations remain open within Ofgem regarding the composition & structure of the cap.  But their outcomes will arrive too late to effect the July quarter’s cap, Cornwall observes.

Aside from the consultants’ gloom about years more of high charges, they see the emerging stablisation of wholesale rates providing conditions for suppliers to bring forward competitive fixed-rate deals.

Cornwall Insight’s principal consultant Dr Craig Lowrey commented “Under these predictions, an average consumer would see bills drop by around £450 compared to the existing levels of the Energy Price Guarantee, with bills currently predicted to stay relatively stable over the next nine months.

“As many people continue to suffer from the cost-of-living crisis, this will hopefully bring some cautious optimism that the era of exceptionally high energy bills is behind us,”

“That is unfortunately where the good news ends. While bills are falling, the cap is still expected to remain comparatively high against historic norms, and those hoping to see a return to the kinds of bills seen at the start of the decade will be disappointed. Regrettably, it looks as if these prices may become the new normal.

“The forecasts call into question the cap’s purpose and its continued place in the energy market. While it has provided some level of protection for consumers against market volatility, it is clearly still not shielding the most vulnerable from enduring severe financial hardship. As our forecasts into 2024 indicate, energy bills will remain at levels that are still unaffordable for many.

“The cap was never intended as a permanent solution and we urge, as we have done previously, for a comprehensive review of the cap and the exploration of alternative mechanisms, such as social tariffs, that can effectively safeguard the most vulnerable. It is crucial to prioritise the development of sustainable solutions that address the affordability challenges faced by energy consumers”.

More here.

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Four million households on prepayment meters will also benefit by an estimated £45 a year from July. For the first time the Chancellor today ordered suppliers to reduce prepayment tariffs to the same levels as charged to direct debit bill-payers.

“Under a Conservative government, the energy premium paid by Britain’s poorest consumers has come to an end”, Hunt told cheering MPs.

The chancellor’s intention to respond on the EPG had been widely leaked. Standard variable tariffs remain at levels three and four times pre-Ukraine levels, despite wholesale prices tumbling due to months of European gas stocks being rebuilt after last year’s severing of Russian supplies.

Without the chancellor’s about-face, billpayers would have faced rises of up to 20 per cent.  With it, the notional typical British household will continue to be cushioned, paying in the region of £2,500 for dual fuel supply over a year.

The extension to July is worth a nominal £160 for typical households, the Treasury calculates. It means households won’t feel the full force of Ofgem’s default Price Cap between April and June. This stands at £3,280.

When adding in the extension, the government claims a typical family will save £1,500 from the EPG and the Energy Bills Support Scheme over their lifetimes.

Analysts at Cornwall Insight believe that more than half a year of energy support from the Treasury is now in its final months, as falling supply & generation costs promise relief at last for bill-payers of non-adjusted tariffs.

Cornwall Insight calculates the EPG has cost £ 29.6 billion from public funds since Chancellor Kwasi Kwarteng introduced it in the autumn.

The consultancy’s Dr Craig Lowrey described today’s intervention as a ‘small price to pay, providing much-needed clarity for suppliers and to protect already hard-hit households’.

“While the government’s decision will come at an estimated additional cost of £2.6bn¹ for the three months to July, our Default Tariff Cap (price cap) predictions indicate that the EPG costs will be short-lived, as average bills are expected to drop well below £2,500 in the latter half of the year”, Dr Lowery observed.

Cornwall’s latest calculations, below, are that falling generation costs will result in Ofgem’s default price cap will drop to around £2,000 as soon as July.

Critics of the government’s EPG have compared it to the success of European neighbours in capping retail tariff rises at 10% or lower, while Britain’s have tripled.   Since the gas price crisis began in late 2021 with the world’s early stirrings from global lockdown, subsidies from Britain’s public purse have contrasted with France’s full nationalisation of EDF and legally enforced caps on tariffs.

From July, British households will pay the lower of the Ofgem Price Cap or the EPG, which will revert to £3,000 from July 2023 until the end of March 2024.

Opening his statement, chancellor Jeremy Hunt said the government’s energy support measures were among £90 billion of cost-of-living protections delivered this year, worth as much as £3,000 to some households.

As calculated by independent experts at the Office of Budgetary Responsibilty, inflation would fall to 2.9% inflation by the end of this year, from currently over 10%, predicted Hunt.

Municipal swimming pools will benefit from new support of £50 million, the Chancellor announced.

From the Energy and Utilities Alliance, chief executive  Mike Foster welcomed Hunt’s extension. “It’s good that the Chancellor has listened to us in the energy industry as well as consumer champions who have all backed this move.

“What we now need is the Chancellor to listen to industry again, by supporting the move towards a hydrogen economy, in the first instance by giving the green light to blending this zero carbon gas with natural gas into our networks. This helps us all decarbonise without spending huge sums ripping out our gas boilers”, added the EUA boss.

At today’s Prime Minister’s Questions, SNP leader at Westminster Stephen Flynn upbraided the premier for paying privately to upgrade a grid connection to heat a swimming pool at his Yorkshire home, at the same time as Scottish homes faced the coldest days of winter. Average bills in Scotland had tripled in twelve months, said Flynn.

Rishi Sunak replied that the government had provided each household with £1,300 over the last year to shield them from rising bills.

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Last week Ofgem announced that its default tariff cap from April  – the regulator’s benchmark-setting ‘price cap’ – will drop nearly £1,000, to £3,280 a year for a notional ‘average’ household.

Even though energy price watchers might be deed into thinking bills will fall in consequence, it’s the rising rates of the EPG that should alarm them, advises Dr Craig Lowery, principal consultant at Cornwall, pictured.

“If the government goes ahead with its proposed plans to raise the EPG limit from an average £2,500 to £3,000 a year from April, far from falling, typical consumers could see their bills skyrocket by £500”, Lowery writes.

“The government will be saving £2.5bn by raising the EPG, but this will come at a cost to households, he counsels.

Despite a small relief caused by the drop in price cap, Lowery warns: “The proposed increase in costs will still be difficult for many consumers who were relying on the EPG to safeguard their finances from unpredictable market trends.

“Instead, they will now be faced with the daunting prospect of having to pay significantly more for their utilities from April.

“In addition, households will also be losing the £400 Energy Bills Support Scheme (EBSS) payment which has also helped shield them from the immediate impact of rising energy costs on their household budgets.

Falling wholesale prices for gas following co-ordinated European action to switch away from Russian supplies have led to secure or even falling retail energy prices in Britain’s continental neighbours.

The consultancy’s modelling predicts that if the EPG were to increase to £3,000 as planned, the estimated cost would be £26.8bn. If it were to remain at £2,500, the estimated cost would be  £29.3bn. If the government were to keep the EBSS for another three months the estimated cost would be £5.8bn.

This morning, a D-ESNZ spokesperson said the government expected suppliers to pass on savings from falling wholesale rates to consumers in coming weeks.

“Government support will continue to help households with their energy bills. By the end of June the EPG will have saved a typical household around £1,000 since it began in October”, the spokesperson said.

But Citizens Advice, the charity tasked with a duty in law to oversee how energy prices affect poor households, today echoes warnings from Labour that the EPG rise will have disastrous effects.

“Without further support from the government, this April will spell catastrophe for millions of households”, CA head Dame Claire Moriarty said.

“Unless the government changes course on planned reductions to the level of support for households under the EPG, we estimate the number of people unable to afford their bills will double, from one in 10 to one in five.

“The government must keep the EPG at its current level of £2,500. Recent drops in wholesale prices mean they have the headroom to do this. The alternative is millions more people unable to keep their house warm and keep the lights on.”

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