Average household energy bills could drop by £129, or 7%, in July, according to a new forecast. However, analysts have said “the crisis is not over for bill payers” struggling to afford gas and electricity costs.
Cornwall Insight, a leading energy consultancy, has predicted the industry regulator’s quarterly cap on energy bills will fall to £1,720 a year for a typical dual-fuel household, compared with its current level at £1,849.
The watchdog for Great Britain, Ofgem, sets a cap on the price suppliers can charge for each unit of energy households use. It uses a formula that tracks wholesale energy prices, as well as providers’ network costs.
Ofgem plans to announce the price level of the next quarterly cap on Friday. The cap, which reflects the average annual dual-fuel bill for about 29 million households, will take effect from July until the end of September.
The latest estimate from Cornwall marks a small rise from its previous forecast of £1,683 a year, which the analyst said was partly due to increases in energy wholesale markets.
Energy prices have been volatile this year, driven lower by economic fears around US trade tariffs. However, optimism over trade talks in recent weeks has helped push up prices in some corners of the market. Trade deals facilitate more economic activity, which typically leads to higher energy prices.
Household bills remain far higher than before the energy crisis, which began in 2021 and was exacerbated by Russia’s full-scale invasion of Ukraine the following year.
Dr Craig Lowery, a consultant at Cornwall, said energy bills were still too high for many. “Prices are falling, but not by enough for the numerous households struggling under the weight of a cost of living crisis, and bills remain well above the levels seen at the start of the decade,” he added.
“The fall is also a clear reminder of just how volatile the energy market remains – if prices can go down, they can bounce back up, especially with the unsettled global economic and political landscape we are experiencing. This is not the moment for complacency.”
A record proportion of British households were unable to pay their energy bills by direct debit last month, because there was not enough money in their bank accounts.
Jess Ralston, an analyst at the Energy and Climate Intelligence Unit, said: “Predicted falls in energy bills simply cancel out recent rises, meaning the crisis is not over for bill payers who are still struggling with gas prices significantly above pre-crisis levels.
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“Costs of oil and gas will always be volatile and can be manipulated by foreign actors like Putin, but every home that is insulated and has a heat pump installed reduces our gas demand and so exposure to these geopolitically vulnerable markets.”
Richard Neudegg, the director of regulation at the price comparison website Uswitch, suggested that consumers on a standard variable tariff should consider switching before the lower price cap is introduced in July.
“There are a number of fixed deals on the market already cheaper than the predicted July rates, and we’re seeing the biggest savings versus the price cap since autumn 2020,” he said.
“The average household on a standard tariff could save about £332 a year by switching compared with the current price cap, which also beats the latest July prediction by about £200 a year.”
Cornwall expects that the price cap will fall again in October, followed by another drop in January, although this is subject to several varying factors, including weather patterns, the impact of the war in Ukraine and EU gas storage rules.