Myron Jobson comments on the Ofgem energy price cap.
Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The fall in energy bills should give us some real breathing room in the near future to absorb stubborn and sticky inflation in other key areas of expenditure, like food, which could persist for a little while longer before coming down.
“Record energy price rises along with broader cost-of-living pressures have forced many households to take stark decisions concerning their energy use, which has led to concerns about the extent and severity of fuel poverty and its impact on people. The National Energy Action estimates that the total number of households across the UK in fuel poverty increased from around 4 million in summer 2020 to around 7.5 million households by April 2023.
“The fall in energy costs means that households can now glimpse the light at the end of a long and winding tunnel, but the pain of elevated energy bills is far from over. Households are still set to pay 82% more, on average, than they did in summer 2021 from July. But in reality, there is no such thing as an average household – everyone’s costs will be different. Remember, 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 like with warmer weather and longer days ahead, we will all be using less energy.
“Standing charges remains a thorny issue. They are applied to gas and electricity bills regardless of whether customers have used any energy, which make 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 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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