Annual energy bill to fall by more than £100 in April as government removes policy costs

Annual energy bills are set to fall by £138 in April due to government changes, trusted forecasters have said.

Initially, costs had been expected to rise when the next energy price cap is announced for the three months from April.

But due to measures announced in the budget, research firm Cornwall Insight said an annual bill will drop 8% to £1,620 for a typical dual‑fuel household.

If the forecast proves correct, yearly bills will be at their lowest since July 2024 and households will experience the biggest price fall in two years.

Policy costs are the key reason bills are rising from 1 January to 31 March in 2026.

Despite a drop in wholesale oil and gas costs, from New Year's Day energy will be slightly more expensive for bill payers than it had been. Nowadays, policy measures are the main determinants of bill falls or increases.

Between January and March, the typical annual dual fuel bill will be £1,758 - up from the current £1,755 cap.

The biggest contributor to bills is the cost of energy, followed by infrastructure charges.

What's changing?

Following the budget, some charges that had been added to bills are being removed and instead funded through general taxation.

Chancellor Rachel Reeves had said the government would reduce bills by £150 through cutting levies.

The Energy Company Obligation (ECO) scheme, designed to tackle fuel poverty and help reduce carbon emissions, has been scrapped.

The vast majority (75%) of renewables obligation costs are being removed from consumer energy bills and coming from the general tax pot.

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The anticipated rise in national grid costs is also slightly lower than initially thought.

A further decline in bill prices in July is seen as likely by Cornwall Insights.

How does the price cap work?

The energy price cap is a limit on the amount energy providers can charge per unit of power. It's set by the regulator Ofgem every three months and is based on wholesale energy prices and policy measures.

The official energy price cap announcement for April will be made on 25 February.

(c) Sky News 2025: Annual energy bill to fall by more than £100 in April as government removes policy costs