Credit, collections & insolvency news
Forecasts for the April 2024 Default Tariff Cap (price cap) show a fall of 14% in the second quarter of the year, with a typical dual fuel consumer expected to pay £1,660 per annum, a £268 decrease from January bills of £1,928 according to Cornwall Insights. The trend is currently expected to persist throughout the year, falling to £1,590 in July before a slight increase to £1,640 from October.
Since mid-November, wholesale energy prices have experienced a significant decline, triggering the anticipated drop in the price cap. Contrary to initial concerns, the Israel-Hamas conflict and problems such as potential LNG production strikes in Australia have as yet failed to materially impact energy supplies. Additionally the absence of further pipeline disruptions, similar to the Finnish Balticconnector rupture, further bolstered confidence in energy security. These factors, coupled with a relatively mild winter to date, have left European gas-in-store levels above expectations for the remainder of winter. This situation has helped to drive down wholesale prices, as seen in the current forecasts of the price cap.
While forecasts have improved for now, global events such as the pandemic, the Russian invasion of Ukraine, and the conflict in Gaza have highlighted the susceptibility of UK energy prices to external factors. Prices may therefore rebound if future incidents, such as the disruption to shipping through the Red Sea, raise concerns over disruption to supplies.
Additionally, there are ongoing consultations on potential changes to the price cap, including the standing charge and bad debt collection, which could impact the overall price cap level.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said “As households brace themselves for energy bill rises in January, current forecasts of price cap dips later in the year may offer a small light at the end of the tunnel. The recent stabilisation of international energy markets has trickled down to April’s price cap predictions, raising hopes that this downward path will continue throughout the remainder of 2024.”
“However, history has shown that the wholesale energy market is highly volatile, and unexpected global events can lead to spikes in energy prices, ultimately feeding through to household bills – as we saw this time last year. Whether concerns in the Red Sea become heightened, or another potential disruption to supply occurs, there are no guarantees the price cap will not rise again.”
“The current scarcity of fixed deals lower than the cap further complicates the situation. With few affordable alternatives, households are left at the mercy of market fluctuations.”
“Ongoing consultations, including over the treatment of standing charges and the costs associated with bad debt collection, contribute to the uncertainty, and we await to see how any changes will influence bills.”
“Ultimately, waiting and hoping that we will avoid another global incident that sends energy prices climbing is not a sustainable strategy for government. To achieve substantial reductions below pre-crisis levels, we must focus on long-term strategies which increase domestic renewable energy sources and reduce our reliance on volatile imports.”
