When are energy bills going to start falling?

Energy bills are at record highs — and now experts say they won’t return to normal until the end of the decade.

If we turn back the clock to 2018, the average household energy bill was around £1,000 a year, according to regulator Ofgem.

However, many paid much less because of the wildly competitive rates offered by gas and electric companies.

Fast-forward to the present day and the average utility bill is around £3,549 a year.

That’s the level of the Ofgem price cap, which limits how much a household with average consumption, paying for a variable rate energy deal via direct debit, can be charged in a year.

Around 80 per cent of UK homes now pay energy bills that are capped by this price cap. But the question households want answered is: when are bills going to fall again?

We asked energy experts what would happen to energy bills in 2023 and beyond.

Bills ‘will be expensive for the rest of the decade’

The bad news is that these prices will remain high for years to come – at least on paper.

Energy advisers Cornwall Insight and Auxilione have predicted all of Ofgem’s price caps with reasonable accuracy during the cost-of-living crisis.

Experts from Cornwall Insight say energy bills for the average household will not fall to less than £1,000 a year until 2030.

A Cornwall Insight spokesman said: “We do not expect wholesale prices to return to pre-pandemic levels this decade.”

Meanwhile, Tony Jordan, Auxilione senior partner, said energy bills would not fall below £3,000 a year until around July 2024.

“We can predict several months ahead, if not years,” he said. “We can see that the numbers don’t go back to £1,000 or anywhere near that.

“The only thing that would change that would be a catastrophic collapse in wholesale prices.”

However, such a collapse is unlikely as wholesale gas prices are expected to be high next year.

These prices fell during the summer and then again in November, but are now rising again due to cold weather and rising demand for gas for central heating.

Jordan said European countries’ gas supplies were about 90 percent full – a normal level as we enter the winter months.

But if countries start replenishing these gas supplies in the spring, cheap Russian gas will not be offered to replenish supplies, he said.

“We’ve always had that,” Jordan explained. “That gives some fear for what will happen in 2023. It will keep prices high next summer, with extra concerns for next winter.’

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You may not be paying your entire energy bill

The good news is that it doesn’t really matter what the energy bill is on paper, what matters is what you actually pay.

Since October 2022, the government effectively pays part of our energy bill.

This is thanks to the Energy Price Guarantee, which determines how much consumers pay per year for gas and electricity.

At present, these bills are capped at £2,500 per annum – again based on a medium level household – rising to £3,000 from April 2023 to April 2024.

The big question, however, is what will happen to the energy bill after April 2024, when the Energy Price Guarantee expires.

Ofgem doesn’t make energy bill predictions that far ahead.

However, Auxilione reckons the price cap will be £3,425 a year from April 2024, falling to £2,463 in July 2024 – although these are just rough numbers at the moment.

Households will therefore face the prospect of paying sky-high energy bills without government support.

The government has said there will be no repeat of the current £400 per household energy bill rebate, which is paid in monthly installments and expires in March 2023.

There will be extra help next year for people on an income-related benefit, WAO and the elderly.