Interactive Investor

Energy bills to fall under new cap

Further decline in the energy price cap adds to a growing sense that things are getting better for personal finances.

24th May 2024 09:37

by Myron Jobson from interactive investor

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A couple discussing energy bills

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Coming hot off the heels of a significant fall in headline inflation, the further decline in the energy price cap adds to a growing sense that things are getting better for personal finances.

“However, the harsh reality is many aren’t feeling it. The substantial jump in the cost of renting and high mortgage rates have come at a high cost in pounds and pence terms. The savings from the fall in the energy price cap won’t touch the sides of what’s needed to offset the heightened housing cost burden for many households.

“Energy bills have thankfully come down after reaching record highs in 2022. However, households are still set to pay 44% more, or £484 on average, than they did three years ago in summer 2021, before the energy price shock caused mainly by Russia’s invasion of Ukraine.

“Remember, there is no such thing as an average household – everyone’s costs will be different. Ofgem’s price cap only limits the amount you can be charged for each unit of gas and electricity you use, not how much you can be billed in total. Your bill is linked to how much you use. But it is likely, with warmer weather and longer days ahead, that we will all be using less energy.

“Standing charges remain a thorny issue. They are applied to gas and electricity bills regardless of whether customers have used any energy, which makes it harder for people to save money by using less energy.

“The fall in energy bills could prompt a much-needed return of decent competition in the energy market, with competitive fixed-price deals overdue for a comeback. However, suppliers might not be in a rush to offer more competitive deals, and any return of competition to the market is likely to be slow.”

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