Your energy bills in the UK set to be £500 lower than last summer

UK energy bills are forecast to continue falling into the summer, with the average household about £500 ($632) better off than a year earlier.

Energy consultancy Cornwall Insight Ltd. predicts the typical tariff will drop 7% to £1,574 from the current cap as wholesale gas and electricity costs ease.

Ofgem is expected to announce the new energy price cap, which sets the maximum tariffs suppliers can charge most households in Britain, on May 24. It will take effect from July 1.

Comparison with previous year

The anticipated reduction would bring significant relief, as the cap in July last year was £2,074.

Despite the positive outlook, the new forecast is slightly higher than Cornwall Insight’s previous prediction of £1,560 for July.

Potential future changes

Cornwall Insight also predicts that Ofgem may increase the energy price cap in October before reducing it again in January 2025.

Craig Lowrey, principal consultant at Cornwall Insight, highlighted the ongoing adjustments:

“Our projections suggest that from July, the average annual bill will fall by around £500 compared to last summer, offering further relief given the quarter-on-quarter drop seen in April. However, we must recognize lower prices don’t erase all the problems. The very fact we are still seeing bill levels which are hundreds of pounds above pre-crisis levels underscores the ongoing challenges faced by households.”

Mechanics of the price cap

Ofgem reviews the price cap every three months based on several factors, primarily the price of energy on wholesale markets.

While the cap limits the cost per unit of gas and electricity, it does not cap the total bill, which depends on individual household consumption.

Review and potential adjustments

Ofgem is currently examining how the price cap is calculated, including changes to standing charges—fixed daily charges that cover supply connection costs.

Lowrey cautioned about the implications of adjusting these charges:

“Reducing standing charges, while seemingly beneficial for low-energy users, could lead to higher unit prices. This could disproportionately impact those in less energy-efficient homes or with greater energy needs, some of whom could be vulnerable.”

Implications for households

The forecasted reduction in energy bills is a welcome development, but households continue to face challenges with prices remaining higher than pre-crisis levels.

As Ofgem prepares to announce the new cap and considers adjustments, the focus remains on balancing affordability with fairness in the evolving energy market.

These changes reflect the dynamic nature of energy pricing and the ongoing efforts to manage the impact on consumers while navigating market complexities.