PwC comments on the updated energy price cap

Benjamin Gough, Infrastructure & Regulatory Economics Leader at PwC UK, said:

“Today’s announcement by Ofgem of a reduction in the energy price cap is good news for domestic consumers, who will see an annual reduction in energy spend of £129* compared to the existing cap. The decision follows a decline in UK natural gas futures from a two-year peak of 141 p/th in February, with the downward trend driven in part by the UK experiencing a warmer start to spring and increasing volumes of LNG supply in Europe. Gas futures do remain higher than 2024 currently, leaving a possibility that the cap could still rise later in the year.

"The reduction in the energy price cap will benefit both businesses and non-domestic customers. But low prices alone are not enough. Profitability continues to be adversely impacted by recent energy price volatility, which has been compounded by broader geopolitical challenges, such as US tariffs. Some energy-intensive sectors like manufacturing are highly exposed to both energy price volatility and tariffs. In this context, it’s positive that the UK government has put the delivery of low and stable energy prices as a key objective of policies such as the Clean Power 2030 Action Plan and the Review of Electricity Market Arrangements. Businesses should continue to engage with government to ensure these interventions deliver on both the net zero and economic growth agendas, whilst continuing to transform their operations to drive productivity and efficiency to mitigate against future price increases and volatility."

* For a dual fuel household with typical annual domestic consumption