Energy bills fall as price cap predicted to drop further in October

Independent

a day ago

Energy bills have fallen for households as latest forecasts predict a further 1% drop in October due to easing Middle East tensions.
Analyst Cornwall Insight expects the cap to fall to £1,698 a year from the current £1,720 for a typical dual fuel consumer, but stressed 'significant uncertainty' remained with two months until the final figure is announced.
The latest forecast comes on the day Ofgem's latest price cap adjustment – a fall of 7%, or £129 – takes effect for households who have still not signed up to a fixed tariff.
The cap sets the limit on how much firms can charge customers per unit of energy, but does not limit total bills because householders still pay for the amount of energy they consume.
The latest cap is £660 (28%) lower than at the height of the energy crisis at the start of 2023 when the Government implemented the energy price guarantee.
However, prices remain elevated at £152 or 10% higher than the same period last year.
Cornwall Insight said its latest forecast reflected wholesale prices falling as military tensions in the Middle East had eased.
But it said the cap still remained hundreds of pounds above pre-pandemic prices, even when adjusting for inflation.
Furthermore, there was little indication that prices would reduce substantially over the next few years, it warned.
It is predicting a further small fall in January, with prices rising slightly in April, but said market volatility, geopolitical risks and potential changes – and additions – to the non-wholesale components of bills meant forecasts remained changeable.
The latest prediction comes as Ofgem announced the go-ahead to an initial £24 billion of investment to upgrade UK energy infrastructure, but revealed the move will push up network charges on household bills by more than £100.
Cornwall Insight principal consultant Craig Lowrey said: 'While any reduction in energy bills is welcome, we must not let small fluctuations in the price cap mask the bigger picture.
' Households are still paying far more for their energy than they were before the pandemic, with the current outlook showing little prospect of a meaningful drop over the next few years.
'Our reliance on international energy markets means that while we have a range of supply sources, this brings with it a vulnerability to global events and price shocks – something that was evident in June. If we want to bring real stability and affordability to the energy system, we need to continue, and speed up, our transition to homegrown, renewable power.
'This transition will not happen overnight, and there will be short-term costs along the way. However, in the long-term, building a more self-sufficient energy system is the only way to help shield consumers from international volatility and put us on a more secure and sustainable path for the future.'
The fall in energy costs will come as a relief for households, who suffered through an 'awful April' of bill rises, including Ofgem's previous 6.4% price cap increase.
Under-pressure households have also been hit with the biggest increase to water bills since at least February 1988, alongside steep rises across bills for council tax, mobile and broadband tariffs, as well as road tax.