Energy price cap fall will take just £150 off average bills from October, experts forecast
- Gas and electricity costs for millions could dip from October, analysts say
- But this could just be a brief respite before costs start to rise again next year
The average household energy bill is set to fall by just £149 in real terms, offering limited respite for Britons struggling with high gas and electricity costs.
Energy analysts at Cornwall Insight have forecast the price cap on energy bills will fall to £1,823 from October, down £250 a year from the current £2,074 energy price cap.
The price cap is set by regulator Ofgem and dictates the price paid by more than 80 per cent of UK households that are on variable-rate tariffs and paying by direct debit.
However, in real terms the typical energy bill will fall by £149, not £250. This is because from October Ofgem will change its sums for how it works out the average energy bill that Cornwall Insight is trying to predict.
The energy regulator works out what the average price-capped energy bill is by using what it thinks are normal amounts of electricity and gas for a home to consume.
Glimmer of hope: Energy bills are set to fall, but only slightly, if Cornwall Insight is correct
Since the start of the pandemic, Ofgem has assumed a normal home uses 2,900 kWh a year for electricity and 12,500 kWh for gas.
From October 2023 those figures will fall to 2,700 kWh and 11,500 kWh, respectively, as Ofgem says the typical home uses less power than it first thought.
Because Ofgem thinks we will use less power, the typical average bill is set to fall further than it would otherwise.
Without the new assumptions the average bill would be £1,925, or £149 less than currently.
The price cap changes four times a year. After October 2023 the next change will be in January 2024.
Worked out using Ofgem’s current energy use assumptions, Cornwall Insight predicts average energy bills will rise to £2,082 in January 2024, fall to £2,014 in April then fall further to £1,965 next October.
Using the new assumptions, typical energy bills will fall to £1,823 in October 2023, then rise to £1,979 in January, drop to £1,915 in April and then fall to £1,867 in October 2024 – if Cornwall Insight’s predictions are correct.
Energy bills are set to rise again due to spikes in gas prices, Cornwall Insight said.
The firm has predicted all previous price cap movements fairly accurately.
Uswitch energy expert Nathalie Mathie said: ‘If the cap is confirmed at this level, then the price of energy for the average household will be 7 per cent lower during October, November and December — but these are some of the coldest months of the year and when households use more energy.
‘Despite another drop in rates, bills are still high when compared to pre-crisis levels, so households will still need to be mindful of their energy usage over winter.’
Ofgem is announcing the exact figures for the October price cap on August 25.
Craig Lowrey, principal consultant at Cornwall Insight said: ‘While a small decrease in October’s bills is to be welcomed, we once again see energy price forecasts far above pre-crisis levels, underscoring the limitations of the price cap as a tool for supporting households with their energy bills.
‘As many, including energy regulator Ofgem have acknowledged, it is essential that the government explore alternative solutions, such as social tariffs, to ensure stability and affordability for consumers.’
