Energy bills expected to be slashed after demand slumps

This week industry regulator Ofgem will set out the level of its latest market-wide cap that will be effective from October.

And energy companies will learn how a lock on default tariff prices, introduced in January last year, will be shifted to account for the costs faced by suppliers.

Ofgem's price cap limits what suppliers can charge an average user on a default tariff and represents their view of the efficient costs companies face in supplying energy to customers.

However, one leading supplier predicts a slump in demand caused by coronavirus will benefit customers across the UK.

With most businesses still working remotely or at low capacity, E.ON expects a 7.5% cut in standard variable tariffs – the equivalent of almost four weeks’ energy use for an average UK home.

A dramatic fall in energy consumption could slash £85 off bills, according to supplier E.ON's chief executive Michael Lewis

“Whilst wholesale prices have continued to fluctuate in recent weeks, we saw significant falls since the start of the year driven by COVID-19 and the subsequent lockdown around the world,” said E.ON UK chief executive Michael Lewis.

"Businesses suspended operations and their energy demand collapsed, flights were grounded and people stopped travelling and remained at home.

“That dramatic fall in demand for energy, including oil and gas, caused wholesale energy markets to fall rapidly since the price cap was last amended at the start of this year.

“Because of this we expect a significantly lower level when Ofgem updates the price cap next month. Such a move also means customers should see the benefit of lower bills in time for the colder months of the year.

“I know people have used more energy at home whilst in lockdown, but the increase in domestic use doesn’t come close to the fall in industrial energy demand or the collapse of the oil price in the wake of global transport restrictions."