Energy bills could be hundreds of pounds lower than previously thought in the latter half of this year but only after a spike in the spring, new analysis has suggested. The average household's energy bill might hit around £2,200 a year from July, around £300 less than previously thought, experts at Cornwall Insight said.
It is around the same as an average family pays today after the Government support has been factored in. Without backing from the Government the average household would pay £4,279 per year for their energy bills between January and April - the level of the Ofgem price cap.
But the Government has overridden the price cap with a promise to pick up the difference and ensure that average bills are £2,500. It has also been sending £400 to every household in the country between October and March. From April the support gets less generous and will only reduce average bills to £3,000.
The new forecasts, from Cornwall Insight, suggest that Ofgem's price cap will be set at £3,209 from the start of April, around £300 less than its previous forecast just two weeks ago. This will not reduce the amount that households pay, as it will still be overridden by the less generous Government guarantee. It will however mean that the guarantee costs the Government less money.
After that, the price cap will fall again to £2,201 from July and rise slightly to £2,241 from October to the end of the year, the energy consultancy said. If these forecasts come true - which is far from certain as gas prices change daily - it will mean that the Government support for energy bills in practice ends in July as bills will naturally be lower than the cap that ministers have promised to enforce.
Gas prices have plummeted in recent weeks, and have more than halved since early December. But while wholesale gas is cheaper than it has been for over a year at around 150p per therm, this is still around three times higher than at the beginning of 2021.
Dr Craig Lowrey, principal consultant at Cornwall Insight, warned that things could rapidly turn around again if global markets get spooked.
"As our price cap forecasts fall yet again, it is only natural that people will begin to assume our predictions will stay on a downward trajectory," he said. "But we really don't have a precedent to look at to work out how the market will evolve in 2023."
Cornwall and other experts have long forecast that energy prices are not going to fall back to what used to be considered "normal" levels until the end of the decade, if at all.
"So, some perspective must be maintained," Dr Lowrey said. "The cap predictions for April remain nearly three times what a typical household was paying pre-pandemic, and as the Energy Price Guarantee rises, some households could be left with hundreds of pounds added to their April bills.
"We do not know what will happen over the coming months and there is a long way to go before anyone can be certain what the true unit rates will be beyond the summer. So, while declining wholesale markets and cap forecasts may be a reason to feel cheerful, nothing is guaranteed in this new European energy market.
"Reading too much, too early, into prices falling, could be just as risky as reading too much, too early into prices rising. Policy really needs to be 'on notice' of sudden changes, and both elastic and responsive in such an environment."
