New data from energy analysts Cornwall Insight suggests that gas and electricity bills could drop to just over £2,800 per year for the average household between July and September. The firm has been accurate with previous predictions since energy prices started to soar early last year following Russia’s invasion of Ukraine.
If the new forecast is accurate, the price drop would help drastically slash the amount that the UK Government has to spend to help households through the summer and autumn. However, while the drop would be welcome news for every household, money saving expert Martin Lewis warns that bills will still be higher than the current rate.
Responding to a question on Twitter after being asked when he thought energy prices would start to come down, the financial guru said that energy prices are likely to drop by around six per cent and stay that way until the end of the year, but that it’s “still a higher rate than the current one”.
Martin explained: “Energy prices will almost certainly rise 20% in April as announced. Then in July the current prediction is energy price cap will then be lower than the energy price guarantee so prices will drop c6% and stay that way til year end (still a higher rate than the current one tho).”
At the moment, if bills are above 34p for electricity and 10.3p for gas, the UK Government pays the excess. This means an average bill of £2,500 for households across the country, a figure which will rise to £3,000 from April.
However, this isn’t the maximum bill anyone could pay under the UK Government’s £2,500 Energy Price Guarantee (EPG) - use more energy and you’ll pay more, similarly, use less and you’ll pay less.
If energy bills fall below £3,000 later this year, the UK Government will no longer have to pay anything to protect regular people.
Dr Craig Lowrey, principal consultant at Cornwall Insight, explained: “The fall below the threshold of the EPG will, if wholesale prices continue at this level, effectively see the scheme no longer costing the Government.
"We must remain cautious as the UK Government has essentially been underwriting a volatile wholesale energy market - one which is likely to remain unstable throughout the year.
"Even if energy prices continue at current levels - which is a big if - the costs to the UK Government over the full period of the EPG are still contributing to Government borrowing and will ultimately fall at the feet of consumers in the form of higher taxes."
He predicted that this bill will hit around £37 billion for the period between October 2021 and April 2024.
Energy prices have recently dropped below levels not seen since before the second phase of the Russia-Ukraine war started in February last year.
Cornwall Insight latest forecasts
Cornwall forecast that energy bills, as decided by Ofgem's price cap, would be:
- £3,545 for the average household between April and June
- £2,800 between July and September
- £2,835 between October and December
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