The average annual energy bill is expected to fall to below £2,000 this autumn, according to the latest Ofgem energy price cap predictions.
Cornwall Insight said in its most recent forecast that it expects the price of an average annual bill to fall to £1,978.33 from October - down by around £100 from July’s £2,074. It said it then expects a small rise from January to £2,004.40.
However, Ofgem is also adjusting its definition of the average household’s consumption from October, down from the current 2,900 kWh a year for electricity to 2,700 kWh, and from 12,000 kWh for gas to 11,500 kWh, to reflect consumers using less energy to cut costs in the face of high prices.
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Based on Ofgem’s adjusted definitions of average usage, Cornwall Insight has forecast that the regulator will announce price caps of £1,871 a year from October and £1,900 from January. The analysts also stressed it is “crucial to understand” that a household’s energy bill is based on the energy it consumes, which could be lower or higher than the defined typical household.
Money saving expert Martin Lewis warned that the figures are only estimations, adding that predicting whether prices will rise or fall at this stage was "crystal ball gazing".
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “The fall in the average price cap predictions reflects Ofgem’s efforts to align with the evolving energy consumption patterns of typical households, as consumers respond to high prices, energy efficiency measures, weather conditions and other influences by reducing their energy usage.
“While typical household predictions may provide some insight for consumers, households are still facing the challenge of bills that are well above historic levels. This situation brings us back to the question of the cap’s purpose – as doubts about the cap’s effectiveness in protecting consumers and its impact on tariff competition become a regular part of energy discussions.
“In light of this, it becomes crucial to explore alternative measures that can better protect consumers, promote fair competition, and ensure affordable and transparent energy pricing for all. The exploration of options such as social tariffs, energy efficiency initiatives, and various other avenues should be prioritised."
He added: “Any reductions in the price cap should not diminish the sense of urgency in implementing necessary changes. The protection of vulnerable households from high energy bills remains a pressing issue that requires immediate attention.”
The latest forecast comes as households have been urged to send meter readings to their energy supplier ahead of Ofgem’s latest price cap coming into effect on Saturday, July 1. The regulator announced it is cutting its price cap from £3,280 to £2,074 from Saturday.
The change marks the first time consumers on default tariffs have seen their prices fall since the global gas crisis took hold more than 18 months ago. At its peak, the price cap reached £4,279.
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 will again govern household bills, resulting in a reduction of £426 from £2,500 to £2,074 – a fall of about 17 per cent.
Households have previously been warned that energy bills are likely to remain stubbornly high through the coming winter, at almost double the rates paid in 2020, and remain above pre-pandemic levels for the rest of the decade.
The price cap rocketed from £1,162 a year for a typical household in August 2021 to its current level of £3,280, having briefly reached £4,279, with the pandemic and Russia’s war in Ukraine both pushing up wholesale prices. The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity, so those who use more energy will pay more.
The standing charge – the roughly £300 paid each year by households just to access gas and electricity – has not been included in the cap and will not fall.
