Energy Prices Are Dropping on April 1st - Here’s How to Make the Most of It

At the end of February, Ofgem, the energy regulator for Great Britain, confirmed that the price cap will drop by 7% from 1 April. It’s the biggest fall we’ve seen since July 2024, and if you look back further, it’s one of the most significant drops since before the 2022 energy crisis, taking prices to levels last seen in October 2021.

Like most people, you’re probably thinking why are there such big changes, and what do they mean for me?

So, what’s behind the latest change to the price cap? Ofgem has announced a 7% drop, which means the average annual energy bill for a typical UK household paying by direct debit will fall from £1,758 to £1,641. That’s around £117 saved each year. It’s not quite the £150 cut the government talked about in last November's Autumn budget, which is due to these cuts being partly offset by increased maintenance and upgrading of the UK’s energy networks, but it’s still a welcome bit of relief for families across the country.

As for why prices are lowering, it mainly comes down to policy changes and cheaper wholesale energy. The Energy Company Obligation scheme has ended, and around 75% of the Renewable Obligation costs have been shifted into generation taxes instead of being added to customer bills. Combine those shifts with falling wholesale prices, and the result is lower energy bills overall, and without these changes by the government, there is no doubt that energy bills would have risen for a fourth consecutive quarter, which would’ve been a reflection of rising grid and infrastructure costs.

Under normal circumstances, Ofgem’s energy price cap only affects Standard Variable Tariffs (SVTs), the default tariff you’re placed on if you haven’t actively chosen or switched to a fixed deal or smart tariffs. If you’re currently on an SVT, your rates will decrease on 1st April as part of the government’s updated price cap.

What’s unusual this time is that most existing Fixed Tariffs will also see a reduction on 1st April. This is unprecedented, as fixed deals normally stay at the rate you originally locked in. However, due to the policy changes mentioned above, these savings will automatically be applied to fixed tariffs as well. If you’re on a fixed deal, you don’t need to take any action; the adjustments will be made for you.

The exact decrease you’ll see will depend on a few factors: the size and type of your home, how many people live there, and your overall energy usage. In some cases, fixed tariffs may drop by more than standard variable ones. This is because policy changes are only one part of your bill. Network costs, like standing charges, also play a role, and customers who are locked in fixed rates often avoid increases to these costs.

You might be thinking, “Typical, the price drop arrives just in time for summer when my usage is lowest.” But there’s good news: the government plans to continue these measures until 2029, meaning the benefits should extend well beyond the summer months.

You may have seen headlines throughout early March reporting that wholesale gas prices have surged, largely due to ongoing conflicts in the Middle East. With that in mind, it’s fair to wonder why household energy prices in the UK are falling at the same time.

It’s also fair to ask why oil and gas prices affect electricity at all. After all, isn’t renewable energy supposed to avoid that? While renewables themselves don’t have fuel costs, the UK still relies on gas‑fired plants to meet demand. Because these plants often set the wholesale price, higher gas (and to a lesser extent oil) costs push up electricity prices, even when a lot of power comes from cleaner sources.

Greg Jackson, CEO of Octopus Energy, the company that powers Your Co-op Energy, recently shared a clear and reassuring explanation of what these global price movements actually mean for UK households.

While the drop in energy prices is welcome news, the cost-of-living pressures many households face haven’t disappeared. Small changes can still make a meaningful difference to your monthly bills.

That’s why we’ve created an energy-saving guide packed with practical tips to help you reduce your usage, save money, and lower your home’s environmental impact. Take a look here.

While energy prices are still higher than many households would like, the April price cap drop is a step in the right direction. Combined with small changes at home, it could help make your energy bills more manageable in the months ahead.