The price cap will rise by £63 in October, the third increase this year. That is the headline. But buried in the small print of energy regulation is a decision that tells a different story about where your money goes. Ofgem has terminated its contract with Cavendish, the consultancy that helped manage parts of the energy market. The news, as reported by PR Week UK, signals a shift in how the regulator wants to spend your money.
Why Ofgem cut the Cavendish deal
Ofgem awarded Cavendish a contract to provide operational support for the energy market. The exact value was not disclosed, but consultancy fees of this scale typically run into millions. The regulator said the termination followed a review of procurement processes. Translation: Ofgem has decided it can do the work cheaper in-house or via a different supplier.
For households, this matters because regulatory costs flow directly into the standing charge on your bill. Ofgem sets the price cap based on efficient supplier costs, which include a slice for Ofgem’s own operations. Every pound the regulator saves is a pound that does not need to be recovered from bill-payers. The catch is that these savings are small, probably less than a fiver a year per household, but they add to the direction of travel.
What it costs a typical 3-bed semi
The standing charge on a standard variable tariff is about £330 a year for a typical dual-fuel household. Ofgem’s own budget is funded partly through a levy on suppliers, which is passed on to customers. If the Cavendish contract was worth, say, £5m over three years, the saving across 28 million households is roughly 18p per home per year. Not enough to notice. But the signal is larger: Ofgem is tightening its own belt while demanding that suppliers do the same.
Energy Saving Trust analysis shows that supplier operating costs account for about 12% of the typical bill. Regulatory costs are a fraction of that. Yet homeowners have been conditioned to expect every line item to rise. A regulator that cuts its own spending is a regulator that can credibly demand cuts from suppliers, and that could mean lower bills down the line.
Who qualifies, and who doesn’t
This decision does not directly affect eligibility for any grant or scheme. It is an operational change at the regulator. But it has indirect consequences for anyone on a standard variable tariff or a fixed deal. Suppliers that have been padding their regulatory cost allowances will find Ofgem less willing to approve them. The Energy Ombudsman has reported a 23% rise in complaints about billing errors in the past year; tighter regulatory oversight should reduce those errors.
For homeowners considering heat pumps, solar panels, or insulation, the message is that the regulatory environment is becoming more disciplined. That should make it easier to trust the numbers when a supplier quotes you a price for an upgrade. It also means that the government’s boiler upgrade scheme and other grants are less likely to be undermined by regulatory slack.
What you should do now
Check your latest energy bill. Look at the standing charge and the unit rates. If you are on a standard variable tariff, you are paying the price cap, but that cap includes a margin for supplier costs that Ofgem is now squeezing. You can switch to a fixed deal if you find one below the cap, but most fixes are currently higher. The smart move is to wait until October, when the new cap takes effect, then compare.
Also, keep an eye on your EPC rating. A better-rated home uses less energy, which insulates you from price shocks. Ofgem’s cost-cutting is a background improvement, but the biggest savings come from your own roof and walls. The Energy Saving Trust estimates that a typical semi-detached home can save £300 a year by moving from band D to band C. That dwarfs anything the regulator will save on consultancy fees.
Households on standard variable tariffs should check their bill now. The next price cap announcement is due in November. If Ofgem’s efficiency drive continues, the rise may be smaller than expected. But do not wait for the regulator to save you money, start with your own home.
Frequently Asked Questions
No. The direct saving from this contract is small, likely less than 20p per household per year. However, it signals that Ofgem is cutting its own costs, which could lead to lower regulatory charges in future price cap calculations.
No. The contract termination is an internal Ofgem decision and does not change any grant or subsidy programme. Your eligibility for the boiler upgrade scheme, ECO4, or Great British Insulation Scheme remains unaffected.
