Energy price cap forecasted to drop again

Cornwall Insights has forecasted that the October-December energy cap will drop to £1,723 a year for a typical dual-fuel consumer, a reduction of nearly £40 annually compared with our forecast in May.

Cornwall Insights says that despite the drop in the prediction, this cap level would still represent a 10% increase from the £1,568 a year cap taking effect on 1st July. An uptick in the wholesale market is the central reason behind the predicted rise in October, with geopolitical concerns and supply-demand pressures having a resultant impact on the cap.  

Looking ahead to 2025 it is anticipated that the January-March cap will stay at a similar level to October.

All the political parties have laid out their proposed energy policy with short-term commitments to review the composition of bills, including a review of standing charges, being included across many of the manifestos.

Shifting network costs away from standing charges to unit costs would benefit low-energy users and may encourage the take-up of energy efficiency measures and households to cut their energy use. However, any change will need to be balanced against the increase in costs which would occur for those in non-energy-efficient homes, including many vulnerable households.

Longer-term reforms including boosting renewable energy, implementing planning reforms, and enhancing energy efficiency, were also widely discussed across party platforms. It is hoped that a shift towards a UK based renewable energy supply, will deliver sustained lower cost bills. However, this transition will take time and substantial investment, therefore it is unlikely we would see any material reductions in bills from these efforts until 2030 at the earliest.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “The drop in forecasts for October are positive, but we need to keep this in perspective. We are still facing an average 10% increase in bills from October, and as winter approaches this will put a strain on many household finances.

“While long-term solutions are being developed, it’s critical to focus on immediate strategies to manage energy bills. Most political parties have proposed reforms to how energy bills are structured, with a review of standing charges front and centre. However any change to bills creates winners and losers, so we urge whoever is in government come 5th July to proceed with caution. Additionally, we would encourage greater discussion on other reforms, such as social tariffs, which could support the pursuit of lower bills over the following months and years.

“Looking to long-term bill reduction, we’ve heard pledges about investing in wind farms, solar power, nuclear energy, and other renewable infrastructure from various parties. However, concrete details on the implementation of these plans are scarce. It’s essential to be transparent with the public, these initiatives require substantial investment – and therefore cost – and time to come to fruition. While renewables are the path to sustainable bill reductions, it will take a long time for households to see these changes reflected in their bills.”

Ben Gallizzi, Energy Expert at Uswitch.com, said “Despite a slight reduction in the forecast for the October price cap, energy bills are still set to rise significantly for millions of households this winter. An increase of 10% means the average household with typical energy consumption can expect to be paying £1,723 a year from October.

“The long-term outlook still remains very uncertain and it is expected that prices will remain at a similar level in the first quarter of next year. Households should therefore avoid being lulled into a false sense of security from falling energy bills this summer, as the reprieve will be relatively short-lived. It’s important to prepare now for future price rises and consider locking in rates while there are competitive deals to choose from.

“There are plenty of 12-month fixed tariffs available that are cheaper than the predicted price cap for October, which can offer price certainty on what you’ll pay for a year and potentially help you save on your bills.”