The UK’s domestic energy price cap may fall by 14% in April, according to analysts.
Experts at independent energy research firm Cornwall Insight believe the energy regulator Ofgem will bring the price cap down to £1,660 a year – based on average use – in spring.
The energy price cap is the maximum amount suppliers can charge you for every unit of energy used.
Ofgem has already announced that the price cap will reach £1,928 from January.
The consultancy previously predicted that the price cap would be around £1,929 in April, but a notable decline in wholesale energy prices since mid-November mean that forecast has now been dropped.
Principal consultant at Cornwall Insight, Craig Lowrey, explained: “As households brace themselves for energy bill rises in January, current forecasts of price cap dips later in the year may offer a small light at the end of the tunnel.
“The recent stabilisation of international energy markets has trickled down to April’s price cap predictions, raising hopes that this downward path will continue throughout the remainder of 2024.”
The analysts also predicted that the price cap would decrease again in July to £1,590, before ticking up slightly in October to £1,640.
Despite concerns the Israel-Hamas war, a tough winter, pipeline disruptions and potential production strikes in Australia, would have an impact on energy prices, supplies seem unaffected.
In fact, Cornwall Insight said European gas-in-store levels are “above expectations for the remainder of winter” – which has helped drive down wholesale prices.
Before prices soared, the average household paid £1,400 annually for energy.
Then in October 2021, as the global economy was still trying to recover post-pandemic, bills started to climb.
Fuel got even more expensive when Russia invaded Ukraine in February 2022 and the West weaned itself off Moscow’s cheap energy exports.
Although the outlook for 2024 looks optimistic, Cornwall Insights warned there are still a few factors which could impact the price cap, including the Russia-Ukraine war and the Israel-Hamas war.
“Prices may therefore rebound if future incidents, such as the disruption to shipping through the Red Sea, raise concerns over disruption to supplies,” Lowrey said.
Standing charge and bad debt collection could also impact the cap, which is known to be “highly volatile”, as Lowrey noted.
He added that UK households are “at the mercy of market fluctuations” right now because there are not many fixed deals lower than the cap out there.
He also called for the government to focus on “long-term strategies which increase domestic renewable energy sources and reduce our reliance on volatile imports”.