U.K. Regulator Keeps Energy Price Cap Stable 

(Bloomberg) --

The U.K.’s energy market regulator Ofgem kept its price cap for how much utilities can charge customers for electricity and natural gas largely steady, reducing it by 1.5%, even after the wholesale market plunged in the past six months.

• The new level of 1,162 pounds ($1,503) will come into effect in April and run through September for customers on a standard variable tariff. It was designed to prevent many millions of customers from being overcharged and stimulate competition.

Key Insights

• U.K. wholesale power prices have dropped almost 40% since a year ago, prompting the downward revision by the watchdog.
• “A lower price cap is positive for big suppliers like EON SE who seem to be prioritizing market share over margins and Centrica Plc, who can now offer much more competitive tariffs now that they’ve started to bear the fruit of cost efficiencies,” Elchin Mammadov, a Bloomberg Intelligence utilities analyst, said before the announcement.
• Natural gas prices have plunged since late 2018 because of a combination of low seasonal demand during a mild winter the winter and a glut of LNG supplies.

Executive Reaction

• “In its first year, the cap is estimated to have saved consumers 1 billion pounds on average on their energy bills and switching rates have hit record levels,” Ofgem’s Chief Executive Officer Jonathan Brearley said in a statement.

Get More

• Read Ofgem’s statement here.

To contact the reporter on this story: Jeremy Hodges in London at jhodges17@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Lars Paulsson, Nicholas Larkin

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