Energy price cap set to fall £440 a year from July, Cornwall Insight says

Households will save £440 a year on their energy bills as the experts’ latest forecasts point to much lower prices in the coming months.

The Ofgem price cap, which sets energy bills for more than 80 per cent of Britain, is expected to fall to £2,062.91 a year for average use in July.

So say analysts at Cornwall Insight, which has built a reputation for accurately predicting energy price levels.

The analysts said energy bills could fall due to lower power demand, better-than-expected energy supplies and warmer weather.

Richard Neudegg, director of regulation at comparison website Uswitch, said: ‘Cornwall Insight’s price cap forecast will be welcome news for consumers as it would save the average household £440 compared to July’s energy price guarantee.’

At present, most households have variable rate energy deals limited by the Ofgem price cap.

This limit is currently £3,280 per year for most households, depending on their gas and electricity consumption.

In practice, however, household utility bills are capped at £2,500 a year for normal use.

That’s thanks to the government’s energy price guarantee, where the state takes on part of the bill for gas and electricity bills.

That means if Cornwall Insight is right, the average utility bill will drop by £437.09 a year from July.

However, Cornwall Insight thinks utility bills could rise slightly later this year.

The Ofgem price limit determines the annual invoice prices, but is updated four times a year.

Cornwall Insight believes this limit will fall to £2,062.91 in July, then rise slightly to £2,098.22 in October, then rise again to £2,162.55 in January 2024.

However, households can still make big savings if energy companies bring back cheaper flat rates.

Historically, the cheapest energy deals were fixed rates, with variable rate deals normally reserved for households that had reached the end of their cheap rate and had not switched.

But energy companies all pulled these cheap fixed deals when energy prices started to rise in October 2021, leaving consumers with no choice but variable rates.

Cornwall Insight now believes the relative calm in the energy market could give these companies the reassurance they need to re-launch fixed rate products.

Craig Lowrey, lead adviser at Cornwall Insight, said: ‘Some energy suppliers may want to take this opportunity to bring back fixed rates at or near the price limit, with stable projections that allay concerns that they will lose over the fixed term.’

But consumers need to be careful not to get locked into a deal that later turns out to be uncompetitive.

Neudegg added: ‘When firm deals return, consumers will have to weigh up whether signing up to a deal is the best option for their individual circumstances.

‘During the term of a fixed contract, the price of the standard variable rate (determined by the Energy Price Guarantee or the price cap) can rise or fall depending on a number of factors.’

Energy regulator Ofgem will set the next price cap for the period from July to September at the end of this month.

Over the weekend, Auxilione experts said annual gas and electricity costs could fall to £1,900 for an average household by July as the energy market returns to ‘normal’.

Tony Jordan, from energy consultancy, said ‘there is fear coming from the markets’.

He added: ‘The price of gas is about 80 pence per therm. In August it was £7. We predicted some scary numbers, but the price has really come down. It’s going in the right direction.’