Energy bills are forecast to fall to £2,200 from July, saving typical households around £800 a year.
Latest estimates from analysts at Cornwall Insight on Thursday show energy bill predictions for a typical household have fallen due to the drop in wholesale gas prices.
A milder winter than expected in Europe combined with higher storage stocks have reduced prices which spiked so sharply last year following Vladimir Putin’s invasion of Ukraine.
The Ofgem Energy Price cap rose to £4,279 per year for the typical household from january but households are protected by the Government which has capped bills at £2,500 until April. After that it is set to rise to £3,000 until April 2024.
Although Cornwall’s analysis forceasts the typical bill to be £3,208 from April - meaning millions will face another rise in their bills - from July the picture improves significantly with the cap set to fall to £2,200 for the second half of the year.
That will remove the need for families to rely on the Government’s Energy Price Guarantee of £3,000, reducing the pressure on the Treasury which has spent billions of pounds supporting households in the cost of living crisis.
Cornwall’s latest analysis is around £300 a year lower than the firm’s previous forecasts issued on 4 January and comes after similar estimates from Investec last week which predicted the fall in gas prices could save the Government around £700m.
However Craig Lowrey, Principal Consultant at Cornwall Insight, warned that energy markets were likely to remain volatile.
He said: “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.
“Right now, positive gas storage and demand reductions in Europe mean the key winter period of concern is looking better. But, whilst today it is “steady as she goes” it is practically inevitable that forecasts will at some point change again as the market wanders about in search of its equilibrium, probably with lower peaks than last year, but not necessarily prices returning to what we define as normal range.
“Some perspective must be maintained. 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.”
