Boost for households as energy bills set to be £500 lower than last summer
The average household energy bill is set to be £500 lower than last summer, according to a an energy price cap forecast.
Energy market research and analysts, Cornwall Insight (CI) predicts the energy price cap will fall by another 7 per cent on 1 July when the latest change comes into takes effect – meaning average annual bills for typical household use, which are currently £1,690 a year, will drop to £1,574 a year – down from £2,074 last July.
CI does expect UK energy regulator Ofgem, which sets the price cap, to raise it again in October, before dropping it in January 2025.
Craig Lowrey, principal consultant at CI, said a fall in bills will offer “further relief given the quarter-on-quarter drop seen in April”.
Bills are much lower that at the start of the energy crisis in September 2021, when the cap was raised to £1,277 annually, due to supply and demand issues seen across the global wholesale market.
Mr Lowrey warned that “bill levels which are hundreds of pounds above pre-crisis levelsunderscores the ongoing challenges faced by households”, adding: “Of course, we must recognise lower prices don’t erase all the problems.”
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Ofgem changes the price cap every three months based on several factors, the most important of which is the wholesale price of energy.
The price cap does not limit a household’s total bills, people still pay for each unit of gas and electricity they use – the figures provided are just for an average-use household.
Ofgem is currently reviewing the price cap and looking at how it is calculated and will officially announce the cap for July to September on 24 May.
Mr Lowrey cautioned over “trade-offs” from changes to the cap and said it was “crucial” to find the right balance.
“Reducing standing charges, while seemingly beneficial for low-energy users, could lead to higher unit prices,” he said.
“This could disproportionately impact those in less energy-efficient homes or with greater energy needs, some of whom could be vulnerable.”
Ofgem announced on Tuesday that rules, which prevent energy suppliers from offering deals to new customers, could end in October,
The regulator said now it was an appropriate time to look at removing the ban, which was introduced in April 2022, as a result of a recent decrease in energy bills.
Additional reporting by Press Association.