Energy bills may be hundreds of pounds lower than previously thought, according to new analysis.
Experts at Cornwall Insight have indicated that the average household's energy bill will hit around £2,200 a year from July - around £300 less than previously thought. This would be around the same as an average family pays today with government support.
However, without backing from the government, the average household would pay £4,279 per year for their energy bills between January and April which is equivalent to Ofgem's most recent price cap. However, this cap was overridden by the government to ensure that average bills are capped at £2,500 - but, this will end from April with the average bill only being reduced to £3,000.
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Cornwall Insights suggests that Ofgem's price cap will be set at £3,209 from the start of April. From July, the price cap will fall once again to £2,201 and rise slightly to £2,241 from October, according to the energy consultancy.
Money-saving expert Martin Lewis explained what the new analysis means. Writing on social media, he said: "Cornwall Insight predicting wholesale price drops will feed into real prices FROM JULY. Today in Eng, Scot & Wales most pay the Energy Price Guarantee (EPG) a govt set subsidised rate. Yet if the underlying price cap drops below that, we'd pay the lower.
"Here's the impact: Govt says it'll increase EPG by 20% in April (so £2,500/yr goes to £3,000 on typical use) [Will this be cancelled in Budget, as lower wholesale means it'd be cheap rabbit from hat]; July price cap drop prediction means bills down 27% (£2,200/yr typical use); Oct 2% rise predicted."
He added: "Prices are hugely volatile at the moment and that is a long way away so things could swing further one way or the other."
Dr Craig Lowrey, principal consultant at Cornwall Insight, warned that things could rapidly turn around again if global markets get shaken up. “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.”
He added: “So, 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. 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.”
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