Analysts predict average household energy bills could fall to less than £2,000 a year this summer following a slump in gas prices
Average household energy bills could fall to less than £2,000 a year this summer following a slump in gas prices, analysts predict.
Annual gas and electricity costs could drop to £1,900 for an average household by July if the energy market returns to ‘normal’.
The current energy price cap – set in April – is £3,280 per annum.
Figures show that gas prices have returned to levels seen 15 months ago, before the Russian invasion of Ukraine sent shockwaves through the energy sector.
Experts have said falling gas prices will be a huge relief to families weighed down by skyrocketing energy costs.
Rising prices resulted in the collapse of around 30 energy suppliers in the UK from 2021, and resulted in the government paying billions of pounds to taxpayers.
An increase in the price of wholesale gas was also a major driver of the cost-of-living crisis, driving inflation into the double digits.
Tony Jordan of energy consultancy Auxilione 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.’
Energy regulator Ofgem will set the next price cap for the period from July to September at the end of this month.
Customers typically paid less than Ofgem’s level as the government’s separate energy price guarantee capped the typical household bill at £2,500 a year.
Jordan said lower wholesale gas prices will trickle down to people’s bills by the summer, when the energy price guarantee expires.
Simon Cran-McGreehin, head of analysis at the Energy and Climate Intelligence Unit, said gas prices have fallen as Europe has withdrawn from Russian supplies. He said the “remarkable” drop in energy consumption in the mainland and the UK also eased pressure on prices.
Government data shows that energy demand fell during the winter to levels not seen in 50 years as millions tried to minimize home energy use.
But Cran-McGreehin warned that the price of wholesale gas could remain up to three times higher than before the crisis if countries continue to avoid energy from Russia.
An Ofgem spokesperson said: “At this point, we expect the next price cap to be lower, but future levels remain uncertain.”
The regulator said lower prices are good news for competition returning to the market as suppliers can offer customers cheaper deals.
Cran-McGreehin added: “Competition was one of the many casualties of the energy crisis as all customers hit the price limit. Now that prices have come down, there is more room for suppliers to offer different rates.’
Jonathan Brearley, boss of Ofgem, said last month that prices are ‘unlikely to return to pre-2021 levels’.