27 million households to benefit from £450 energy bill cut

Households finally got some good news yesterday, with energy bills set to drop by £450 a year within weeks. Experts predict gas and electricity charges will tumble in July – and that could just be the start.

In a further boost, suppliers will soon be competing for business again, driving prices down further. And there are positive signs that bills will ease even more later in the year as wholesale prices for gas across Europe return to levels seen when the Ukraine war broke out.

Dr Craig Lowrey, principal consultant at energy forecasters Cornwall Insight, said this will “hopefully bring some cautious optimism that the era of exceptionally high energy bills is behind us”.

The fall will be kick-started by the regulator Ofgem slashing its price cap on Thursday. It is expected to lower it by 18 percent, from £3,280 today to around £2,053.

That will mean bills will drop as soon as July, with 27 million households finally benefiting from the decline in European natural wholesale gas prices.

Cornwall Insight is forecasting bills could dive even further in October. Although the cost-of-living crisis is not over due to high food prices, it will begin to ease.

April’s inflation figure, to be published on Wednesday, is expected to show a slide to 8.4 per cent from 10.1 per cent in March. The nation has struggled with the energy shock for more than a year following Russia’s invasion of Ukraine, which sent European gas prices rocketing and triggered fears of shortages.

But wholesale natural gas prices have now fallen sharply since spiking last August, as European countries topped up their storage tanks in a race to wean themselves off Putin’s energy imports.

The mild European winter and the drive among businesses and households to cut usage also helped reduce costs.

In a further boost, this year’s mild spring weather has also helped depress prices to a two-year
low. Chris Hurcombe, chief executive of Catalyst Digital Energy, said: “Forecasts suggest temperatures will remain above the seasonal norm for the coming weeks.”

Households had partial protection under the Government’s energy price guarantee, which currently limits the typical household
dual-fuel tab to £2,500 until the end of June.

With bills falling significantly from July, energy experts said competing suppliers are also expected to offer competitive tariffs as soon as next month. This will finally allow ­households to shop around for a ­better deal.

Go.Compare’s energy spokesman Gareth Kloet said: “The trends are all moving in the right direction and bills will fall.”

Richard Neudegg, director of regulation at Uswitch.com, said if the lower energy price cap is confirmed on Thursday as expected this should give suppliers the confidence to start bringing back fixed energy deals for customers.

He said: “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.”

In a further cyclical boost, bills will naturally fall in the summer as everybody uses less heating and lighting. It is a far cry from last winter, when experts were forecasting the energy price cap could top £4,000 amid widespread blackouts and shortages.

Wholesale gas and electricity prices have continued to slide over the past three months, with summer 2023 contracts now at 18-month lows.

But while energy bills are set to ease, they will stay comparatively high against historic norms. Dr Lowrey added: “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.”

Cornwall Insight predicts the energy cap will be £1,976 from October 1, before edging up to £2,045 from January 1. Simon Francis, coordinator of the End Fuel Poverty Coalition, said ­household bills do not just reflect wholesale prices but also ­transmission and trading costs, which is why they have not fallen as far as many expect.

He said: “Ofgem’s price cap allows for a profit margin of just under two per cent, so it’s in the interest of suppliers to keep bills as high as possible.”

But the regulator’s decision to change the energy cap quarterly rather than just twice a year has allowed it to pass on savings to consumers quicker, he added. Matt Copeland, head of policy at National Energy Action, said falling energy bills are good news – but they are still too high.

He said: “The Government must recognise this and look to provide targeted financial support to the households that need it most in the winter to come.”

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