Energy price cap set to fall in April 2024 but standing charges will increase

Energy regulator Ofgem has announced a reduction of the energy price cap for the second quarter of 2024, but standing charges are going up.

Ofgem says the price cap, which sets a maximum rate per unit that can be charged to customers for their energy use, will fall by 12.3% on the previous quarter from 1 April to 30 June 2024. For an average household paying by direct debit for dual fuel this equates to £1,690, a drop of £238 over the course of a year – saving around £20 a month.

This will see energy prices reach their lowest level since Russia’s invasion of the Ukraine in February 2022 caused a further spike in an already turbulent wholesale energy market, driving up costs for suppliers and customers. However, the prices remain much more expensive than pre-pandemic levels.

The unit rate for gas will be 6.04p per kWh, down from 7.42p per kWh to 6.04p per kWh, and electricity will drop from 28.62p per kWh to 24.50p per kW. However, standing charges are up, rising from 29.60p per day to 31.43p per day for gas, and 53.35p per day to 60.10p per day for electric.

Ofgem is also announcing:

  • Confirmation of the levelisation of standing charges to remove the ‘PPM premium’ previously incurred by prepayment customers.
  • A decision to allow a temporary adjustment to the price cap to address supplier costs related to increased levels of bad debt.
  • A decision to extend the ban on acquisition-only tariffs (BAT) for up to another 12 months.
  • Confirmation of the end of the Market Stabilisation Charge (MSC) from April 1.
  • A decision not to change wholesale cost allowances following a review conducted in late 2023.

Jonathan Brearley, CEO of Ofgem, said:

“This is good news to see the price cap drop to its lowest level in more than two years – and to see energy bills for the average household drop by £690 since the peak of the crisis – but there are still big issues that we must tackle head-on to ensure we build a system that’s more resilient for the long term and fairer to customers.

“That’s why we are levelising standing charges to end the inequity of people with prepayment meters, many of whom are vulnerable and struggling, being charged more up-front for their energy than other customers.

“We also need to address the risk posed by stubbornly high levels of debt in the system, so we must introduce a temporary payment to help prevent an unsustainable situation leading to higher bills in the future. We’ll be stepping back to look at issues surrounding debt and affordability across market for struggling consumers, which we’ll be announcing soon.

“These steps highlight the limitations of the current system – we can only move costs around – so we welcome news that the Government is opening the conversation on the future of price regulation, seeking views on how standard energy deals can be made more flexible so customers pay less if using electricity when prices are lower.

“But longer term we need to think about what more can be done for those who simply cannot afford to pay their energy bills even as prices fall. As we return to something closer to normality we have an opportunity to reset and reframe the energy market to make sure it’s ready to protect customers if prices rise again.”

Glynn Williams, UK Country Director, Grundfos, said:

“While Ofgem’s latest energy price cap is a welcome development, fiscal measures are only a temporary solution that do not tackle the problem of energy inefficiency at its root.

“Rather, households should be empowered to take control of their finances by improving their home’s energy inefficiency in a more impactful and sustainable manner. By implementing low-effort, high-impact measures – such as optimising a heating system through hydraulic balancing, using a controlling device such as a thermostat or replacing an old circulator pump – homes can improve their energy consumption and generate greater energy savings now and well into the future.”