UK energy bills could fall by £450 a year, experts say
Energy bills could fall by £450 a year, experts say, but they won’t return to normal until the end of the decade
- According to analysts from Cornwall Insight, household energy costs will fall from July
- However, they are still much higher than normal and may remain so for years to come
Households will save £447 a year on their energy bills, experts think – with exact prices to be finalized in less than a week.
However, energy bills are not expected to fall to normal levels in the next seven years, these forecasts say.
Ofgem’s price cap, which sets energy bills for more than 80 per cent of UK homes, is expected to drop from £3,280 to £2,053 a year for average use from July.
While the maximum price is currently £3,280, most have effectively capped their bills at £2,500 under the government’s energy price guarantee.
The forecasts come from analysts at Cornwall Insight, which has built a reputation for accurately predicting changes in energy price levels.
Cornwall Insight has today published its final forecasts for accounts between July and September, with the exact figure due to be finalized by Ofgem on 25 May.
Drop: Energy bills are about to drop, but will likely remain high for years to come
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. The ceiling applies to households that pay by direct debit.
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.
The Ofgem price limit determines the annual invoice prices, but is updated four times a year.
Cornwall Insight believes the price cap will then fall to £1,975.70 per annum from October to December 2023, then rise to £2,044.96 from January to March 2024.
All eyes on cheap fixed rates
Households can still make big savings if energy companies bring back cheaper fixed 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.
A statement from Cornwall Insight said: ‘We do not currently expect bills to return to pre-2020 levels until the end of the decade at the earliest.
“However, we hope to see the return of more competitive flat-rate energy pricing as prices begin to stabilize, giving consumers additional options to manage their energy costs.”
But consumers need to be careful not to be locked into a set deal that later turns out to be uncompetitive.