Household energy bills in the UK are forecast to decline by £129 annually from July, marking the first reduction in a year after a series of increases. This adjustment follows the regulator Ofgem’s review of the price cap, which limits the maximum charges suppliers can impose for gas and electricity.
The predicted decrease, amounting to nearly 7%, offers some relief to millions of households amid sustained high energy costs. Analysts at Cornwall Insight attribute the drop to changes in wholesale energy prices and expect this trend to continue with further modest reductions later in the year.
Context and Significance of the Price Cap Adjustment
The energy price cap, set by Ofgem every three months, applies to around 22 million households across England, Wales, and Scotland.
It regulates the maximum price suppliers can charge per unit of energy, based on a typical household consumption of 11,500 kWh of gas and 2,700 kWh of electricity annually. The cap ensures consumer protection in a volatile energy market but does not control total bills, which vary with usage.
According to Cornwall Insight, the new price cap will reduce the typical annual bill for a dual-fuel household paying by direct debit from £1,849 to approximately £1,720. Dr Craig Lowrey, principal consultant at Cornwall Insight, described the reduction as “a welcome development” that offers “much-needed breathing space” after prolonged high costs.
However, he cautioned that bills remain significantly above levels seen at the start of the decade and that energy affordability continues to pose a challenge for many households.
The forecasted price cap drop is partly due to lower wholesale energy prices, influenced by global factors including changes in US tariffs and easing trade tensions. Cornwall Insight also anticipates further modest decreases in October and January 2026, although ongoing geopolitical uncertainties and weather patterns could affect these projections.
Energy Market Volatility and Policy Implications
The reduction in the price cap highlights the persistent volatility within the UK energy market. Dr Lowrey emphasised that price fluctuations remain a risk, with the potential for increases as well as decreases. The current global economic and political environment contributes to this instability, underscoring the need for continued vigilance.
Experts stress the importance of targeted government support measures to help vulnerable consumers. Social tariffs and other assistance schemes are recommended to ensure that those most affected by the cost-of-living crisis do not fall behind as the energy market evolves.
Moreover, while broad market reforms such as zonal pricing are under consideration, their implementation will take years. In the meantime, the growth of domestically produced renewable energy presents a positive development, improving energy security and helping to mitigate the impact of international price shocks.
The predicted fall in the energy price cap marks a cautious but important step in addressing the UK’s energy affordability issues. It signals a temporary easing for consumers but also a reminder of the ongoing challenges faced by the sector and households alike, according to Cornwall Insight’s analysis.
