Average annual energy bill could drop £200 from October, experts suggest

Energy bills could fall faster than expected, experts predict, saving the average home more than £200 a year.

However this is only limited good news for households struggling with high energy bills, as these costs are set to stay high for years to come.

A household using average amounts of energy currently pays bills of £2,074 a year – the level of the price cap set by regulator Ofgem.

More than 80 per cent of homes pay bills limited by this price cap, as they are on variable-rate energy tariffs and paying by direct debit.

With energy bills so high, the reality of what most consumers pay for gas and electricity rests on changes to the Ofgem price cap, which is set four times a year.

Before July 2023, most homes paid energy bills capped at £2,500 a year – the limit of the Government’s Energy Price Guarantee (EPG), a policy meant to take some of the pain out of high energy prices. 

But in July the EPG rose from £2,500 to £3,000, while the price cap remained below it at £2,074. 

Because of this, the Ofgem price cap has gone from being meaningless to crucial for most households.

Now analysts at Cornwall Insight, which has a strong track record of predicting energy price changes, have released optimistic new figures about the likely future of gas and electricity bills.

When Ofgem next changes its price cap, in October, Cornwall Insight has lowered its original prediction of a £24.22 rise to a £213.34 a year fall – with the price cap expected to be £1,860.66, not £2,098.22.

Ofgem normally announces the new price cap several weeks ahead of it coming into force.  

But the predicted fall in energy prices may not last long.

Past January 2024, the analyst firm thinks the price cap will rise slightly to £1,916.74 in April and then fall again to £1,870.43 in July 2024.

Craig Lowrey, principal consultant at Cornwall Insight, said: ‘The news of a relative stabilising of energy bills will no doubt leave households with mixed feelings. 

‘After the surge in bills seen last winter, it may bring a sense of relief to people that energy prices are currently not forecast to surge unexpectedly. However, there will also be disappointment with prices still well above the levels seen a few years ago – leaving many longing for more affordable options.’

Cornwall Insight has previously predicted that household energy bills will not fall significantly for years.

The firm said ‘prices in Britain will not shift below 2022 levels until the late 2030s’.

Cornwall Insight said the UK will increasingly turn away from gas and towards electricity during this period, which will ramp up demand for electricity – and therefore prices.

The Government’s £3,000 EPG will last until April 2024.

The Government has no plans to extend it past that point, meaning households will have to pay full energy bills from next April onwards.

Last year households also got a £400 energy bill rebate, which ended in March 2023 and is not being repeated.

This was applied as a set of six discounts per month of £67 to bills for customers with a standard meter and as vouchers for homes with pre-payment meters.