Brits are set to get some “much-needed respite” with their energy bills after a leading energy market analyst predicted a 15 per cent drop in Ofgem’s price cap on bills.
Cornwall Insights released a fresh prediction this morning, announcing in its forecast for April-June of this year, the default tariff cap, also known as the ‘price cap’, would be reduced.
The price cap, according to Ofgem the regular, is the maximum amount energy suppliers can charge consumers for each unit of energy, on a standard variable tariff.
It predicted based on analysis, that the price cap would be £1,635 per annum, representing a fall of 15 per cent from the existing price cap, set at £1,928 per year for a typical consumer.
This comes before Ofgem’s expected official price cap announcement on 23 February, with Cornwall saying a number of outstanding issues were yet to be decided, with regard to the level and composition of the cap. It therefore warned there could be “additional costs being included in the cap”, not in the forecasts.
It said the cap will keep going down until July, which is also due to the seasonal change, causing fewer Brits to use oil and gas for heating especially. Cornwall warned there would then be a “small rise in October” but the latest projections show the cap would “stay below the current level until the end of the year.”
Energy prices have been driven up in the last few years as a direct result of the Russian invasion of Ukraine, and the strain that has put on the supply of fuel. Although it started to ease in the last six months, the flare-up of Middle East tension, in particular around the Red Sea, has put renewed pressure on supplies.
Cornwall Insight’s forecast
Cornwall said the predictions show that Britain has “for now, weathered the storm of Red Sea tensions” by securing a stream of liquified natural gas from other areas of the world, which has helped to suppress prices.
It said despite this more rosy outlook, the UK’s “strong reliance on imported LNG means geopolitical insecurities remain a threat to energy supplies and therefore consumer bills.”
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.”
At the end of 2023, there were calls by energy experts to rethink – and even abolish – the price cap.
Read more
Ofgem’s energy price cap to increase by five per cent as rising costs drive up winter bills