Summer is just around the corner and there's good news on the horizon for British households. According to leading industry analysts at Cornwall Insights, a further fall in the price cap for average household energy bills is expected this summer, with expectations set at £1,574 annually.
Expected Drop in Household Energy Bills this Summer
Energy price caps are a regulatory measure introduced by Ofgem to limit the amount that suppliers can charge customers per unit of gas and electricity. This cap is reviewed and adjusted quarterly to reflect changes in the wholesale energy market.
Cornwall Insights says their projection shows a 7% fall from the current level of £1690. The price cap for the July to September quarter will be announced by regulator Ofgem next Friday.
Assuming Cornwall Insight's predictions are correct, this will mean a fall in the typical gas and electricity bill of around 25% in a year, with prices falling by around £500 from July 2023.
The cap has been lowered by 12% to £1,690 from April, contributing to what is expected to be a sharp fall in the inflation rate for the month.
The rate will be revealed by the Office for National Statistics (ONS) on Wednesday, and could even fall to the Bank of England's target rate of 2%.
The fall in energy bills is expected to play a major role in reducing inflation rates. At a time when the cost of living crisis continues, lower energy prices could ease the financial pressures on families and contribute to greater economic stability.
However, the good news does not detract from the fact that energy bills remain significantly higher than they were before the crisis. Many households are still struggling with high costs, which raises questions about the overall effectiveness of price caps in making energy affordable.
Price Cap Changes to Come
A slight increase in the price cap is expected in October, followed by a decrease in January 2025. This fluctuation is the result of a variety of market factors, including weather conditions, supply availability, geopolitical considerations and oil price fluctuations.
Earlier this year, Ofgem announced a comprehensive review of the price cap and its underlying framework. The purpose of the review is to address existing challenges and establish a fairer and more effective system for regulating energy prices.
Craig Lowrey of Cornwall Insights highlights the complexity of these reforms. One aspect of the complexity is the potential impact of reducing standing charges.
While this change may be beneficial to those who use little energy, it may also lead to an increase in unit prices, which could disproportionately affect those with greater energy needs.
Despite these optimistic forecasts, Richard Neudegg, Director of Regulation at Uswitch.com, stresses the importance of not becoming complacent.
Given that the price cap is adjusted every quarter, it is vital that households remain well-informed and consider opting for fixed tariffs to ensure price stability.
For those looking to lock in rates, many 12-month fixed tariffs are available at prices below the current cap. Some even offer prices that are 2% lower than the rates expected in July, so you can save money.
