Energy bills to fall 7% in April — but experts warn savings won't last
The Government has found £117 off your annual energy bill, but there's a catch: they didn't magic it from thin air or suddenly fix Britain's broken energy market. Instead, ministers have simply scrapped a scheme that helped low-income households insulate their homes, trading long-term fuel poverty measures for short-term political relief.
Cornwall Insight, the energy consultancy, expects Ofgem to reduce the price cap to £1,641 annually for a typical dual fuel household when the regulator announces its decision by 25 February. That represents a 7% drop from current levels when the new cap takes effect on 1 April.
Chancellor Rachel Reeves promised a £150 saving when she announced the move in November's budget. The reality? About £145 once VAT and regulatory methodology are factored in, according to Cornwall Insight. And that's before you account for the fact that actual savings depend entirely on individual usage patterns — higher-consumption households will see larger reductions, whilst those who use less energy will save considerably less than the headline figure suggests.
Policy shift, not market improvement
What's striking here is where the savings are actually coming from. Wholesale energy costs haven't dramatically improved since the last cap announcement. In fact, gas prices have edged upward recently, driven by what Cornwall Insight diplomatically describes as "geopolitical factors" — a reference to the ongoing volatility in European energy markets stemming from the war in Ukraine.
The heavy lifting comes instead from eliminating the Energy Company Obligation scheme, a Conservative-era policy that funded energy efficiency improvements for vulnerable households. The scheme added costs to everyone's bills to pay for insulation, heating upgrades, and other measures designed to reduce energy consumption for those who needed it most.
Scrapping it provides immediate bill relief. But Craig Lowrey, principal consultant at Cornwall Insight, points to the obvious tension: "Investment is needed if we want an energy system that is more secure and resilient, after the consequences of exposure to global energy markets were made all too apparent in recent years. However, there needs to be an open conversation about the fact that such a transition will not be cost free."
Translation: the Government has bought itself a political win by cutting green levies, but hasn't addressed the fundamental problems that sent bills soaring in 2022. Wholesale markets remain exposed to global shocks. Infrastructure requires billions in investment. Network maintenance costs are rising, not falling.
The cost of keeping the lights on
That last point deserves attention. Cornwall Insight notes that increases in network operation and maintenance charges have already offset some of the savings from scrapping the ECO scheme. Britain's energy infrastructure is ageing, and the push toward net zero requires substantial upgrades to transmission networks, local distribution systems, and generation capacity.
Those costs don't disappear. They get passed on to consumers, creating an awkward collision between the Government's dual commitments to lower bills and decarbonise the energy system. You can't simultaneously promise cheap energy and build the infrastructure needed to reduce dependence on imported fossil fuels without someone paying the bill.
Cornwall Insight expects the price cap to remain "relatively steady" throughout 2026, with only a modest increase predicted for July. That forecast assumes wholesale prices don't spike again — a significant assumption given the current geopolitical climate and Europe's continued vulnerability to supply disruptions.
Simon Francis, coordinator of the End Fuel Poverty Coalition, urged households to look beyond headline figures when Ofgem makes its official announcement. "Households will need to keep a close eye on Ofgem's announcement next week and pay careful attention to the changes in unit costs and standing charges, rather than focus on the headline 'average energy bill' figure," he said.
What comes after the one-off cut
The question facing policymakers is what happens once this one-off policy adjustment works its way through the system. The £145 saving from scrapping the ECO scheme isn't repeatable — you can only eliminate a levy once. Future reductions would need to come from structural improvements in wholesale markets or further cuts to environmental and social programmes, neither of which looks particularly likely.
Meanwhile, the households who previously benefited from ECO-funded efficiency improvements will continue living in poorly insulated homes, spending more on heating than necessary and contributing to higher overall energy demand. The programme existed because fuel poverty remains a persistent problem — 13% of English households were in fuel poverty as of the last official statistics, and that was before the 2022 energy crisis.
Energy companies will adjust all tariffs from April, regardless of whether customers are on fixed or variable deals. For businesses and households trying to plan budgets, the volatility in energy markets over the past three years has made forecasting nearly impossible. This cut offers temporary respite, but Lowrey's warning rings true: keeping bills down beyond April will prove considerably harder than engineering a one-off reduction through policy changes.
The Department for Energy Security and Net Zero insisted it is "delivering on our promise" of £150 off bills. Perhaps. But delivering a promise and solving the underlying problem are two different things entirely.
