The UK’s energy price cap is set to fall by £268 a year as of next April, a new forecast shows, offering households a “glimmer of hope” for lower bills.
The average home currently pays £1,834 per year for their energy, but this is set to rise to £1,928 in January, when the energy regulator, Ofgem, increases the maximum amount suppliers can charge for energy usage.
However, a prediction from energy analysts Cornwall Insight said this would then drop by 14 per cent in April, to £1,660, lowering bills.
It expects the cap to then drop to £1,590 in July, before tipping back up to £1,640 as of October 2024.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “As households brace themselves for energy bill rises in January, current forecasts of price cap dips later in the year may offer a small light at the end of the tunnel.
“The recent stabilisation of international energy markets has trickled down to April’s price cap predictions, raising hopes that this downward path will continue throughout the remainder of 2024.”
Cornwall Insight said that since mid-November, wholesale energy prices had experienced a significant decline, as contrary to initial concerns, the Israel-Hamas conflict and other global factors had not materially impacted energy supplies.
It warne,d though, that global events such as the pandemic, the Russian invasion of Ukraine, and the conflict in Gaza had highlighted the susceptibility of UK energy prices to external factors, and so prices could rebound in the future.
Dr Lowrey added: “History has shown that the wholesale energy market is highly volatile, and unexpected global events can lead to spikes in energy prices, ultimately feeding through to household bills – as we saw this time last year.
“Whether concerns in the Red Sea become heightened, or another potential disruption to supply occurs, there are no guarantees the price cap will not rise again.”
Natalie Mathie, energy expert at Uswitch.com, said: “Suggestions that the price cap could fall significantly in April will bring a glimmer of hope to consumers, but they still face a tough winter with high energy bills over the coming months.”
She said the prospect of a 14 per cent fall in the price in April, and potentially another drop in July, meant that there was “light at the end of the tunnel” for consumers – but only if these predictions became reality.
“Caution is still required as the wholesale market is influenced by many factors. Predictions are less certain the further out they go, and a lot could change between now and February, when the April price cap will be officially announced.”
Households should also be aware that the cap marks the maximum suppliers can charge per unit of energy used, which means those using more could still pay more than £1,660 per year under the cap and those who use less will pay less.
The calculations for a typical household are based on the assumption that a direct debit dual fuel customer uses 11,500 kWh of gas and 2,700 kWh of electricity a year.
It only applies to those on their supplier’s default cap, so those who have a fixed price deal with a provider could still pay a higher or lower rate. However, there are currently very few deals available for cheaper than the price cap rate.