Help for households as energy price cut should bring average bills below £2,000
- Gas and electricity costs for average homes could fall to £1,925 from October
Millions of households are ready for relief from painfully high energy prices when typical bills fall below £2,000 this autumn.
Industry analysis suggests annual gas and electricity costs for average homes will fall from October to £1,925 below regulator Ofgem’s energy price cap, due to be announced this Friday.
It will be the last sign of joy for consumers after a long period in which rising prices across the economy have put pressure on household finances.
Millions of households ready for relief from painfully high energy prices when typical bills fall below £2,000 this autumn (File image)
Inflation is now falling, falling to 6.8 percent this week – the lowest level since Russia invaded Ukraine in February last year.
And wage growth is accelerating at its fastest pace ever, meaning workers are finally enjoying a welcome – if small – boost in purchasing power so far.
A source from the Treasury said yesterday: ‘This is a positive step that will help millions of households.
“We spent billions protecting families as prices rose during the winter, covering nearly half of the average household’s energy bill. We are now seeing costs fall even further due to the fall in wholesale prices.’
> Drop in energy price cap takes £150 off bills – but can they rise again afterwards?
But with interest rates projected at 6 percent by the end of the year, borrowers could still see their monthly mortgage payments rise.
If Ofgem’s price cap drops next week, as predicted by independent energy research firm Cornwall Insight, it will be the first time typical bills have fallen below £2,000 since last summer.
It comes at a time when Britons will be concerned about the cost of turning up the heating in the colder autumn and winter months. Yet prices will still be much higher than they were before the war in Ukraine, when bills were just over £1,000.
Energy prices rose after Vladimir Putin’s tanks rolled into Ukraine last year, driving up the wholesale price of gas in world markets
The cap affects those with standard variable rates — which amounts to about 29 million households according to regulator figures earlier this year.
Craig Lowrey, chief adviser at Cornwall Insight, said: ‘While a small drop in bills in October is to be welcomed, we are once again seeing energy forecasts well above pre-crisis levels.’
Energy prices rose after Vladimir Putin’s tanks rolled into Ukraine last year, driving up the wholesale price of gas in world markets. That pushed up Ofgem’s energy price cap.
The cap is intended to ensure that suppliers pass on lower prices when they fall, but to allow them to raise prices when wholesale costs rise.
Typical bills rose to £1,971 in the summer of 2022 and would have risen further had it not been for government intervention that capped last autumn’s household bills.
It meant that even as the Ofgem price cap rose above £4,000 at the start of this year, typical bills did not rise above £2,500, with the difference being paid by the Treasury. Falling wholesale prices saw the Ofgem limit drop to £2,074 from July, meaning government subsidies were no longer needed.
Cornwall Insight’s forecast for the price cap from October comes after Ofgem’s ‘observation window’ – the period during which it monitored wholesale prices – closed earlier this week. The latest forecast at a similar stage of the process was just £21 away from the final figure for July.
The consultancy predicted that for the October figure to be released next week, typical bills will look even better when lower estimates of household energy use are taken into account. Based on that reduced domestic consumption, they drop to £1,823.
But Cornwall Insight expects energy bills to rise again early next year due to a recent rise in wholesale gas prices.