Energy bills to fall but stay above pre-crisis levels
Household energy bills are due to fall by almost a fifth when the price cap is lowered next week, according to analysts.
From July the standard energy tariffs used by 27 million households is expected to fall from £2,500 – the tariff since October – to £2,053 to reflect tumbling gas and electricity prices in the global wholesale markets.
The regulator, Ofgem, is expected to confirm the change on Thursday when it announces its latest update to the cap.
Without the energy price guarantee, the energy price cap would have allowed suppliers to charge an average of £3,549 a year from October, £4,279 a year from January and £3,280 a year from April.
Analysts believe that the energy price cap could fall to less than £2,000 from October. While this will be presented as good news for households it would still be significantly higher than pre-crisis norms of between £1,000-£1,200 a year.
Consumers will also be denied the package of subsidies that have eased pressure on household budgets.
Craig Lowrey, principal consultant at Cornwall Insight, said: “While bills are falling, the cap is still expected to remain comparatively high against historic norms, and those hoping to see a return to the kinds of bills seen at the start of the decade will be disappointed.
“Regrettably, it looks as if these prices may become the new normal.”
Richard Neudegg, director of regulation at Uswitch, said: “This latest prediction is promising news for households with energy prices set to head in the right direction.
“If the price cap falls to around this level, it will be lower than the Energy Price Guarantee. This means that the cost of a standard variable tariff will once again be dictated by Ofgem and reviewed every three months.
“We’ll wait to see the confirmed price cap level when it’s announced on Thursday, but this should give suppliers the confidence to start bringing back fixed energy deals for customers.
“When deals do become available, consumers will need to decide if they want to lock in rates for a longer period, rather than risk the volatility of the standard variable tariff.
“One in two consumers have told us they’d choose a fixed tariff to give them more certainty on their energy costs, so it’s vital that they’re now given back that option.”
Cornwall and Investec are calling for the introduction of “social tariffs” to offer permanently cheaper rates for poorer and vulnerable households.