Energy bills are expected to remain “relatively stable” but significantly above pre-pandemic levels for the foreseeable future, according to latest analysis.
Consultancy firm Cornwall Insight has forecast “relatively small fluctuations” for energy regulator Ofgem’s price cap through to September next year, which it expects will fall to £1,860 for a typical dual fuel household in October 2023.
Following this initial dip, the cap is projected to rise to around £1,960 in January, before further small decreases in March and July.
The price cap fell from £3,280 to £2,074 from July 1 in a relief for consumers who have seen typical bills soar from £1,271 a year in October 2021 due to the global gas crisis.
The wholesale market remains the main driver of bills, and unfortunately there is no immediate prospect of prices there returning to historic averages— Craig Lowrey, Cornwall Insight
Households have been partly shielded from the most recent rise in prices by the Government’s Energy Price Guarantee (EPG), which limited annual energy costs to £2,500 for the average household – subsidising Ofgem’s price cap.
Ofgem’s latest cut means its cap again governs household bills, resulting in a reduction of £426 from £2,500 to £2,074 since July – a fall of about 17%.
The energy price cap sets a limit on the maximum amount suppliers can charge for each unit of gas and electricity.
The headline price cap figure is an average across households rather than an absolute cap on bills, so those that use more will pay more.
Craig Lowrey, principal consultant at Cornwall Insight, said: “The news of a relative stabilising of energy bills will no doubt leave households with mixed feelings.
“After the surge in bills seen last winter, it may bring a sense of relief to people that energy prices are currently not forecast to surge unexpectedly. However, there will also be disappointment with prices still well above the levels seen a few years ago – leaving many longing for more affordable options.
“The wholesale market remains the main driver of bills, and unfortunately there is no immediate prospect of prices there returning to historic averages. Therefore, it becomes imperative the Government and other stakeholders explore alternative measures to cater to consumers. This includes options to provide targeted support to the most vulnerable while promoting flexible energy solutions that encourage efficient energy usage.
“Moreover, we must remain committed to funding the transition to renewable energy sources and maintaining our net-zero targets. By doing so, we can establish a stable and secure energy supply that is less susceptible to fluctuations in the international market.”
Emily Seymour, energy editor at Which?, said: “These predictions that the price cap will remain relatively stable for the next year will give consumers some certainty over their energy bills for the foreseeable future.
“However, energy bills are still almost double the amount they were before the energy crisis began and these prices will be unaffordable for many households. If you are concerned about struggling to pay higher bills, there is help available. Speak to your energy provider about a payment plan you can afford and check to see if you qualify for any Government schemes.
“Fixed deals are starting to return to the market, though so far there’s limited opportunity to save much money compared with price capped tariffs. If you are offered a deal then we wouldn’t recommend fixing for anything higher than the current price cap or longer than a year.
“It’s also really important to check the tariff’s exit fees in case you want to leave that deal early if the price cap comes down unexpectedly or cheaper deals appear.”
