Energy bills are forecast to fall below £2,000 a year by the summer, bringing much needed relief to millions of customers.
Households will begin to benefit from lower wholesale costs by July, investment bank Investec predicted today.
But it points out that bills will remain “considerably higher” than in the past, in a “challenge” for many people.
Under the Government’s Energy Price Guarantee (EPG), an average customer is currently paying around £2,500 a year for their gas and electricity.
The actual amount varies by usage - the EPG puts a cap on how much you pay for each unit of gas and electricity you use, as well as the standing charge.
The taxpayer is picking-up the tab for the difference between the EPG and regulator Ofgem’s separate price cap - which will be £3,280 from April - and is designed to reflect suppliers’ costs.
But Investec is estimating those costs will fall to such an extent that Ofgem can slash its price cap to £1,981 a year in July, then £1,966 in October.
That is significant for the Treasury as it is well below the EPG, saving the Government a fortune.
Analysts at Cornwall Insight say a typical bill will drop to £2,013 in July, then £2,002 in October.
Millions of households have been left reeling from rocketing energy bills, adding to the cost of living misery.
It came on the back of a leap in wholesale energy prices, which surged after Russia’s invasion of Ukraine.
Those costs have begun to ease, but most households and businesses have yet to benefit.
It is the first time since December 2021 that Investec has forecast that Ofgem’s price cap will drop below the £2,000 a year mark.
The £1,981 estimate for July is down on Investec's previous prediction of £2,056.
Investec analyst Martin Young stressed that its estimates were “volatile” given that events can change.
He said anything that lowers bills was welcome but added “it does not disguise that these estimates are still considerably higher than historic levels.”
For context, the Ofgem price cap in August 2021 was £1,277 a year.
The update from Investec comes after Chancellor Jeremy Hunt delayed a planned £500 rise of the EPG.
The EPG had been due to hit £3,000 a year from April - but it will now stay at its current level of £2,500 until July.
By this point, if the Ofgem price cap falls in line with predictions, energy bills will fall below the EPG anyway.
