Energy prices through 2023 may be a lot cheaper if the most recent prediction from the energy consultancy firm Cornwall Insight is correct.
The group’s latest forecast predicts the cost of gas to be below the Government’s Price Guarantee from July this year.
This means around 26million households will be governed once again by Ofgem ’s Price cap rather than the Government’s guarantee.
Currently, the Government’s Energy Price Guarantee, which limits the amount energy suppliers can charge per unit of energy used, is set at £2,500, it is not a cap on energy bills.
From April this year, the Price Guarantee will rise to £3,000 however, Cornwall Insight believes the typical annual energy bill in the summer could be around £2,800.
The reason for the predicted drop in wholesale energy prices has been due to warmer-than-average Winter temperatures across Europe and high gas storage levels.
Cornwall Insight says that if energy costs do drop below the Government’s Guarantee then it will no longer be a cost to the Government and in turn, the taxpayer.
This is because the Price Guarantee capped consumer energy bills and compensated energy suppliers the difference between the Price Guarantee and the price cap.
However, the overall cost to the Government of the Price Guarantee for the period to April 2024 is still a predicted £37billion - money which will need to be recovered through the taxpayer.
Cornwall Insight said it was “positive” to see a drop in the price cap forecast however warned that household bills are set to remain high and the Government may still need to support consumers and businesses with their energy bills.
This is because the current £2,800 forecast is significantly more than the Price Cap level of the same period in 2021 which was £1,138.
Craig Lowrey, principal consultant at Cornwall Insight said: "We must remain cautious as the 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 government over the full period of the Energy Price Guarantee are still contributing to government borrowing and will ultimately fall at the feet of consumers in the form of higher taxes."
In its release, Cornwall Insight criticised the Government’s approach to energy support saying it was “clear that blanket measures of bill support” was not providing “adequate protection for the most vulnerable”.
The group noted the Government’s idea to reform the energy market which includes a review of domestic energy prices and the introduction of energy social tariffs which Cornwall Insight says the Government should consider.
It added: “While the details of future support are best left up to the judgement of politicians, the forecasts demonstrate we must look beyond the current policy if we are to see a fairer, more cost-efficient and enduring way of reducing household energy bills for those who need it the most.”
From January 1, Ofgem's Price Cap sits at £4,279 until March 31 however experts believe this will reduce throughout 2023.
