Energy price cap predicted to fall by £300 a year

Latest forecast by Cornwall Insight has predicted that energy bills will fall in April by nearly £300 a year for a household using a typical amount of gas and electricity.

The forecast for the April – June Q2 2024 forecasts that a typical dual fuel household will be £1,635 per annum. This is a fall of 15% from the current price cap which was set at £1,928 per year for a typical consumer.

Cornwall Insight is forecasting the cap will continue to decline in July, with a small rise in October. However, the latest projections indicate that the cap will stay below the current level until the end of the year.

Lower overall price cap predictions suggest the UK has, for now, weathered the storm of Red Sea tensions, securing a steady supply of LNG through the Atlantic. Good availability of cargoes in Europe and Asia, in part due to mild weather, has contributed to the drop in prices.

Despite the positive outlook, the UK’s strong reliance on imported LNG means geopolitical insecurities remain a threat to energy supplies and therefore consumer bills. The official cap announcement by Ofgem is scheduled for 23rd February.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “Forecasts show energy bills returning to their lowest levels in over two years, providing a much-needed respite for a nation struggling with a cost of living crisis.

“Fairly healthy gas supply across the Atlantic, coupled with high storage levels in Europe, are helping to keep bills down. But we mustn’t get too complacent. Our energy system is still walking a tightrope, and we cannot be sure another political or economic crisis won’t send bills straight back up.

“Even with the drop, prices will remain a struggle for many. We need to remember, bills remain hundreds of pounds above pre-pandemic levels, and if we don’t speed up the switch to sustainable energy and cut down on volatile imports, they are likely to stay that way.”

Richard Neudegg, Director of Regulation at Uswitch.com said “After a painful two years of sky-high energy bills, suggestions of a 15% drop in rates could be some light at the end of the tunnel.

“While the price cap won’t officially be announced until next week, today’s forecast is a clear indication that energy prices are finally moving in the right direction and would be the lowest cap in two years.

“Consumers won’t feel the benefit from a fall in rates until the price cap comes into effect in April, so positive though today’s prediction is, it can’t help households save on heating their homes just yet. Prices are forecast to fall again in July, but the market remains unpredictable, and it is hard to know how energy rates will look when usage climbs again in winter.

“With more than just a glimmer of hope on the horizon for wholesale energy costs, all eyes are now on suppliers to see how they will price their other deals. Consumers have waited long enough for better tariff choices, and desperately need the opportunity to take advantage of cheaper rates.”

Cornwall Insight’s Default Tariff Cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer)

QUARTERLY	New TDCV		Q2 2024 CI Forecast	Q3 2024 CI Forecast	Q4 2024 CI Forecast
Electricity	2,700 kWh		£841.50	£776.91	£822.45
Gas	11,500 kWh		£793.02	£688.17	£701.49
TOTAL			£1,634.51	£1,465.07	£1,523.95