Energy bills for households are expected to fall by an average of £129 this July, a new forecast shows.
Bills in England, Wales, and Scotland are expected to drop by around 7 per cent, Cornwall Insight says, providing some relief to consumers amid the ongoing cost of living crisis.
The industry analysts predict the typical annual household energy bill will fall by £129, settling at around £1,720 when Ofgem’s revised price cap takes effect.
Ofgem, the energy regulator which is responsible for setting the upper limit on what energy suppliers can charge customers, is expected to formally announce the updated price cap on Friday.
It is likely to reverse the increase for millions of households on 1 April, under the current cap.
The typical annual household energy bill rose to £1,849 per year – an increase of £111 – last month. For those who pay their bills every three months by cash or cheque, it increased to £1,969.
So is now a good time to fix your energy prices? The i Paper takes a look.
The energy price cap covers around 22 million households and is set every three months by Ofgem.
It fixes the maximum price that can be charged for each unit of energy on a standard – or default – variable tariff for a typical dual-fuel household that pays by direct debit.
Between 1 April and 30 June this year, gas prices are capped at 6.99p per kilowatt hour (kWh), and electricity at 27.03p per kWh.
The cap does not apply in Northern Ireland, which has its own energy market.
Why is it price cap changing?
According to Cornwall Insight, the forecast has increased slightly since its last prediction, mainly due to increases in the energy wholesale markets.
It also assumed that Ofgem will continue to apply its traditional approximately £28 debt-related cost adjustment until at least the end of September – which is applied to help energy suppliers recover additional debt-related costs incurred between April 2022 and March 2024.
A decision is due from the regulator on a longer-term solution ahead of the coming winter.
Looking ahead, Cornwall Insight expects a modest drop in the price cap this October, which is good news for consumers, followed by another in January 2026.
But a range of factors could shift these forecasts, it said, including changing weather patterns, the relaxation of EU gas storage rules, ongoing debates around US tariffs, and the continuing impact of the war in Ukraine.
Dr Craig Lowrey, principal consultant at Cornwall Insight, said the fall was a clear reminder of just how volatile the energy market remains: “If prices can go down, they can bounce back up, especially with the unsettled global economic and political landscape we are experiencing.
“This is not the moment for complacency. The Government must continue to explore targeted support, including social tariffs, to ensure those most in need are not left behind as the market evolves.”
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While any fall in energy bills will be welcome news to struggling homes, Simon Francis, coordinator of the End Fuel Poverty Coalition, said the reality is that prices remain far too high for millions of people.
Like Dr Lowrey, he pointed out that energy costs are still linked to volatile global fossil fuel markets, leaving families exposed to future price shocks.
“Bills could be even lower – and stay low for good – if the Government fully invested in the warm homes plan to insulate homes, reduce demand, and cut our reliance on expensive gas,” he said.
“Without this long-term action to fix the root causes of cold, damp homes, the predicted drop in energy bills is just a temporary reprieve, not a real solution.”
Is now a good time to fix your energy bill?
Fixed-price deals are not affected by the energy price cap. They offer a certainty for a set period – often a year, or longer – but if energy prices drop when you are on the deal, you could be stuck at a higher price. You may also have to pay a penalty to leave a fixed deal early.
Checking comparison sites can help you find the best deal.
Myron Jobson, senior personal finance analyst, at interactive investor, told The i Paper: “Any fall in energy bills is a step in the right direction for households, who have been buffeted by a new wave of higher bills since the start of the new tax year. However, this is also a critical moment for households to reassess their options.
“Continued geopolitical pressures mean that the direction of travel for energy prices isn’t clear cut. For those considering a fixed-rate deal, this could be a chance to lock in lower prices and shield themselves from future market volatility.
“However, it’s crucial to weigh the benefits against potential exit fees, which can bite if rates continue to drop. Now more than ever, comparing the market is essential – there’s real potential to save if you take the time to shop around.”
What are the current cheapest deals?
Depending on your household and usage will depend on the size of your bill.
Richard Neudegg, director of regulation at Uswitch.com, said: “The expectation of a drop in July’s price cap is welcome news. But any household still on the standard variable tariff should ditch it well before then.
“There are a number of fixed deals on the market already cheaper than the predicted July rates, and we’re seeing the biggest savings versus the price cap since autumn 2020.
“The average household on a standard tariff could save around £332 a year by switching compared with the current price cap, which also beats the latest July prediction by around £200 per year.”
The cheapest current deal is with Outfox the Market, on a 12-month plan, costing an average of £1,517 – already over £300 less than the current cap.
So Energy offers a 12 month rate with an average bill of £1,591.
Bigger brands Eon Next and Ovo Energy offer 12-month rates of £1,597 and £1,611, respectively.
How a typical household could save cash on their energy bill
For a three-bedroom house in London using 233kWh electricity and 536kWh gas per month, Compare the Market estimates you will currently pay around £122 per month, lower than the current price cap.
Should you use more energy, your bill could be much higher.
However, there are some cheaper deals out there, including:
E.ON Next, which has a 12-month fixed tariff that will cost £1,261.70 per year – £105.14 per month – and save this example household £17.83 per month. But there is a £100 exit fee if you want to leave early. Tulo Energy has a 12-month fixed deal that will cost £1,273.01 per year – £106.08 per month – and save this example household £16.83 per month. This deal comes with a £120 exit fee. So Energy, which again offers a 12-month fixed deal that will cost £1,276.39 per year – £106.37 per month. Like E.ON Next, it comes with a £100 exit fee. Read More Details
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