Energy prices predicted to fall by £450 from July
Ofgem has lowered the price cap today
Last updated 25th May 2023
Anylysts say Ofgem is expected to lower household energy bills to an average of £2,053 a year from July, to reflect tumbling wholesale prices.
The regulator has announced its latest energy price cap today, as campaigners warned consumers are likely to feel little relief with bills remaining well above pre-pandemic levels.
Consultancy firm, Cornwall Insight, says households should also expect their energy bills to remain stubbornly high through the coming winter, at almost double the rates paid in 2020 - and remain above pre-pandemic levels for the rest of the decade.
The Government's temporary Energy Price Guarantee (EPG) has capped gas and electricity bills at an average of £2,500 for a typical household since October, lower than Ofgem's price cap.
All households in England, Scotland and Wales also received £400 from the Government to offset soaring prices over the winter.
However, Ofgem's cap is set to fall below the EPG - which will rise to £3,000 from July - meaning it will once again determine the amount firms can charge customers for their energy from July 1.
Cornwall Insight has predicted Ofgem's cap will fall by more than £1,000 from £3,280 for the three months from April - when households were still protected by the Government scheme - to £2,053 from July to reflect the tumbling cost of gas in the global wholesale markets.
However, the typical household is likely to see its annual bill fall by about £450 - the difference between the Government's current Energy Price Guarantee and Ofgem's new price cap.
The price cap has rocketed from £1,162 a year for a typical household in August 2021 to its current level of £3,280, having briefly reached £4,279, with the pandemic and Russia's war in Ukraine both pushing up wholesale prices.
The cap does not set the maximum a household will pay for their energy but limits the amount providers can charge them per unit of gas or electricity, so those who use more energy will pay more.
The standing charge - the roughly £300 paid each year by households just to access gas and electricity - is unlikely to fall.
Energy is regulated separately in Northern Ireland, where bills will be held at £1,950 per year for an average household.
'The gas crisis will linger'
Head of analysis at the Energy and Climate Intelligence Unit (ECIU), Simon Cran-McGreehin, said: "Whilst the falling price cap is a relief for households, this gas crisis will linger, with wholesale price forecasts suggesting that the average household energy bill might not get below £1,700 a year for the rest of this decade - that's around £600 (about 50%) above where it was before the gas crisis.
"If we don't get on with insulating homes, installing heat pumps and building more renewables, gas demand will remain high, and that means bills will too."
Energy Saving Trust chief executive, Mike Thornton, said: "The UK Government must not lose the acute sense of urgency needed to address the root causes of the energy and climate crises for the long-term while ensuring that proper support remains in place for those that need it now.
"Energy prices are still around twice as high as they were just over two years ago.
"Despite setting a target of 15% reduction in energy demand by 2030, the UK Government has not set out a plan about how it will be delivered.
"They need to drive forward the systemic changes required to minimise bills, cut carbon and increase energy security for the long term. We cannot afford to wait any longer for the urgent action required."
The cost of libing crisis is affecting many:
Interest rates and inflation go up
Inflation rose by 8.8% in the 12 months to January 2023, down from 9.2% in December 2022. With interest rates also rising to 4%, those saving money will earn more interest on their finances, whilst those paying mortgages would pay more interest to the bank.
Energy bills
The price of energy went up incredibly as the cost of living crisis hit, with the gas price spike caused largely by the war in Ukraine. The price cap - which is set by an independent regulator to help offset costs onto customers - was set to rise to £3,549 for an average home in October but a price freeze from the government restricted the typical bill to £2,500. That's still an increase of 27% from the previous energy cap and as it's a cap on unit cost, the more energy you use the higher your bill will be.
Food prices
The cost of a weekly shop also has gone up as a result of the cost of living crisis. As a result of the war in Ukraine, a number of products including cooking oils and wheat have been disrupted. This means that several products are now considerably more expensive, driving bills up for customers.
Prices at the pumps
The average cost of petrol has also rose to unprecedented levels. Supply lines for petrol have been thrown into doubt as a result of the war in Ukraine, as Russia is a large export partner for gas, oil and fuel. In April 2022, the average price for a litre of petrol on the forecourt was 160.2p, whilst a litre of diesel would cost 170.5p. By late June 2022 the price had risen to an average of 190.9p for a litre of unleaded and 198.9p for a litre of diesel. In March 2023 the price wass on average of 147.03 in petrol and 167.04 in diesel.
Average cost of filling up a car with petrol hits £100
On 9th June 2022, the average cost of filling up a car with petrol hit £100 for the first time ever. Diesel had already hit that milestone. It comes as the cost of fuel hit a record high of one pound eighty a litre. The 2p rise was the biggest daily jump in 17 years. Prices have dropped by at least 20p per litre since the high point.
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