Come July, we predict an enormous drop in domestic energy costs in the UK. Such an eventuality would represent a dramatic turnaround after three successive rises in Ofgem’s price cap. The Office of Gas and Electricity Markets (Ofgem) has recently made a surprising and fantastic cut. Now, this wonderful improvement will help all of those 22 million households in England, Wales, and Scotland!
Customers paying by direct debit will see their energy bills fall by £166 per year. This update will reduce the typical annual bill to an average of £1,683 across all payment methods for a typical dual-fuel customer. Ofgem then regularly reviews and resets the price cap every three months. This creates consumer protection from predatory pricing.
Cornwall Insight, a consultancy known for its bullish forecasts, is expecting a new energy breakthrough to make waves. They forecast the energy price cap to fall by almost 9% in July. If approved, this would bring the average residential bill to its lowest point since last fall. To put that in context, the average bill was £1,568 this time last year.
A number of different factors have gone into this expected decline in energy costs. Certainly warmer-than-expected weather in Europe has helped, but so too has the effect of US tariffs policy. Together, those two factors have fundamentally changed the dynamics of the market and has led to a reduction in energy costs for consumers.
Craig Lowrey, principal consultant with Cornwall Insight, highlighted the need for caution alongside what is welcome news of falling bills.
“While a fall in bills will always be welcomed by households, we mustn’t get ahead of ourselves. We have all seen markets go up as fast as they go down, and the very fact the market dropped so quickly shows how vulnerable it is to geopolitical and market shifts,” – Craig Lowrey, principal consultant at Cornwall Insight.
These latest price cap increases highlight the extraordinary volatility in the UK’s energy market. Households across the country will be looking with interest as Ofgem completes its final review in weeks to come. Final decision will need to strike the right balance given continued economic headwinds and shifting consumer demands in the midst of an increasingly unpredictable international energy situation.