Published by Global Banking & Finance Review®
Posted on February 25, 2026
2 min readLast updated: April 2, 2026
Add as preferred source on GoogleOfgem will lower the UK energy price cap by 7% from April, cutting the typical annual bill to £1,641. The reduction is driven mainly by budget moves shifting policy costs to taxation.
By Susanna Twidale
Feb 25 (Reuters) - Most British households will see lower energy bills from April, energy regulator Ofgem said on Wednesday after cutting its price cap by 7% under government measures to ease costs.
The move follows plans set out in last year's budget to shift some renewable energy costs to general taxation and scrap a scheme requiring suppliers to fund measures such as insulation for low-income households.
“The main driver of today’s reduction is the change to policy costs announced by the Chancellor in the budget,” Tim Jarvis, Director General, Markets, at Ofgem said.
The new cap of 1,641 pounds ($2,218.96) a year for average electricity and gas use is 117 pounds lower than the level set for January to March.
The government said last year it would shift 75% of the cost of the Renewables Obligation, which funds renewable power generation, from consumer bills to general taxation from April.
It also said it would scrap a scheme requiring energy companies to fund measures such as insulation and new heating systems for low-income households.
The two measures would remove around 150 pounds a year from average household bills, it added.
However, soaring network costs have offset some of those savings.
Wholesale gas and power prices are a major part of the formula Ofgem uses to calculate the price cap and these fell over the past few months, but network costs are becoming a larger part of the bill as the network is upgraded.
Network costs rose by 66 pounds compared with the last price cap period as levies associated with a 24 billion pound upgrade to the country's energy transmission system started to be added.
The price cap on standard tariffs was introduced in 2019 and currently covers around two thirds of households.
($1 = 0.7395 pounds)
(Reporting by Susanna Twidale in London, Aatrayee Chatterjee in Bengaluru; Editing by Rashmi Aich, Andrew Heavens and Nivedita Bhattacharjee)
Ofgem is cutting the UK energy price cap by 7% from April, which will lower typical household energy bills amid ongoing cost-of-living pressures.
Bills for households on default tariffs are expected to drop by about £117 a year from April, bringing the typical annual bill to around £1,641.
The main driver is budget policy changes that move some renewable and efficiency-related costs from bills to general taxation and end a supplier-funded insulation scheme.
Most British households on standard variable (default) tariffs will see the reduction. Customers on fixed-rate deals may see different pricing depending on their contracts.
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