The latest energy price cap announcement brings a welcome if modest reduction in prices for 22 million consumers, and valuable context to the politically corrosive debate over the Winter Fuel Allowance.
From July, the maximum unit price for gas and electricity will come down 7%, amounting to a cut of £129 to Ofgem’s notional “typical usage” calculation for an average household, now set at £1,720.
It is the first fall in a year, reflecting the path of natural gas wholesale prices, which have been in decline since March and, on current forecasts, are expected to remain broadly flat as we head into the winter.
If that’s the case, then consumers can look forward to a period of relative calm when it comes to energy bills. Given that this cut will begin in July, the lowest-consumption quarter of the year, it would be particularly welcome if lower rates continue into next winter.
The weather, global economic fortunes determined by Donald Trump and the path of the war in Ukraine will all influence those prices, and you might not want to rely on any of them.
It is a safe bet that the winter fuel row will still be simmering, and this announcement is a reminder that it is a benefit with far greater political currency than actual economic benefit to the recipients.
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At £200 for anyone of pensionable age, rising to £300 for those over 80, the universal allowance was negligible or irrelevant for millions of recipients, but fundamental to the very poorest households.
The price cut announced today is worth 64% of the lower rate, and 43% of the £300 payment, underlining that energy prices and pensioner poverty are the fundamental issues, rather than an arbitrary benefit unchanged in 25 years and falling in real-terms value ever since.
Returning gas and electricity prices to the long-term pre-Ukraine war average of around £1,200 would almost double the value of the winter fuel payment, but there is little chance of that in the short term.
Addressing the wealth imbalance in a society where a quarter of the population will rely wholly on the state pension in retirement may be even more intractable.
In the meantime, consumers are advised to shop around for deals. This morning, several major suppliers are offering fixed rates below the new price cap, which might offer value even in a stable market.
