Cornwall Insight’s final forecast for the next energy price cap, which will take effect from 1 April, predicts it will fall to £1,635 per year.
Currently, the energy price cap for Q1 2024 (January to March) is set at £1,928 per year for a typical gas and electricity customer.
Cornwall Insight’s figure includes the new £16 bad debt allowance, but its inclusion in the energy price cap has not yet been officially confirmed by Ofgem.
There also remain a number of ongoing consultations by Ofgem into the level and composition of the cap, the outcome of which is unknown at present. As such, there is the prospect of additional costs being included in the cap, which are not in Cornwall Insight’s forecasts, once the regulator has made its decisions.
It’s important to note that the energy price cap sets a maximum price that energy suppliers can charge for each kilowatt hour (kWh) of energy and a daily limit on the standing charge applied that covers the cost of supplying energy to your home.
It isn’t a cap on bills, as how much you pay will depend on the amount of energy you use. The cap will also vary depending upon where in the country you live, with Cornwall Insight figures representing the national average. Ofgem sets the energy price cap every quarter.
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.
A return to ‘lowest levels in over two years’
The latest predictions from analysts suggest the UK has, for now, weathered the storm of Red Sea tensions, securing a steady supply of liquefied natural gas (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.
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.”
The official energy price cap announcement by Ofgem is scheduled for this Friday (23 February).
