The UK’s energy sector regulator, Ofgem, announced on Friday that a reduction in the price cap for household energy bills will commence in July.
This development comes at a crucial time, coinciding with the second day of general election campaigning, highlighting a significant cost-of-living issue.
Ofgem revealed that the cap on energy bills for most UK households will drop by seven percent due to declining wholesale costs.
Specifically, the annual amount suppliers are allowed to charge an average household consuming electricity and gas in England, Scotland, and Wales will decrease to £1,568 ($1,990) from £1,690, effective from July 1. This reduction follows a similar decrease in April.
The announcement arrives just two days after Prime Minister Rishi Sunak initiated the campaign for a July 4 general election.
Despite this positive economic news, the governing Conservative party remains significantly behind the main opposition Labour party in opinion polls.
Conservative ministers quickly capitalized on the news, framing it as evidence that Sunak’s economic policies are yielding results.
Energy Minister, Claire Coutinho, commented, “This is the second biggest big cut that we’ve seen,” calling it “really welcome news.” She added, “Our gas prices are now lower on average than other European countries… I want to see (bills) continue to be lower for people.”
While the new price cap will be about £500 less than in July 2023, it still remains over £400 higher than in 2021.
The elevated prices are largely due to the significant spikes in wholesale energy costs following Russia’s invasion of Ukraine, a major energy producer.
Ofgem emphasized that further reductions in bills are expected as wholesale energy costs continue to decrease.
This trend offers some relief to households that have been grappling with high energy costs since the start of the conflict in Ukraine.
On the campaign trail in Scotland, Labour leader, Keir Starmer, acknowledged the ongoing cost-of-living pressures faced by many Britons. “Everywhere I go, so many people tell me the cost of living is still bearing down on them,” Starmer said.
Labour has pledged to create a publicly-owned clean energy company, Great British Energy, which it claims would help further reduce average energy bills.
Despite the reduction in energy bills, Sunak’s tenure has been marked by decades-high inflation. Although the rate of inflation has moderated, recent official data showed that UK annual inflation in April was higher than expected as the economy emerges from a recession.
Compounding the economic woes, UK retail sales fell by 2.3 percent last month, attributed to wet weather deterring shoppers from physical stores.
Consumer rights groups have expressed cautious optimism about the price cap reduction. Clare Moriarty, chief executive of Citizens Advice, remarked, “Today’s (energy price) news will give small comfort to households still facing cost-of-living pressures.”
She noted that while the fall in the energy price cap reduces bills slightly, many people continue to struggle financially.
“Our data tells us millions have fallen into the red or are unable to cover their essential costs every month,” Moriarty added, urging the government to provide targeted energy bill support to those most in need.
The announcement of a reduced energy price cap by Ofgem is a significant development in the ongoing cost-of-living crisis in the UK. While it offers some relief to households, the broader economic challenges and the political implications of the upcoming general election add layers of complexity to the situation.
As the campaign progresses, both major parties will likely continue to address energy costs and economic policies, seeking to reassure voters and address their immediate concerns.
