The energy price cap is set to fall again, according to a closely-watched forecast, as the energy regulator has said the average home is using less energy.
The average household will be paying roughly £200 less from autumn than they are from next month, but still “well above” historical levels, energy research specialist Cornwall Insight said.
Ahead of Ofgem’s new price cap coming into effect on Saturday 1 July, the research firm said it saw the cap for a typical household at the equivalent of £1,871 per year from October to the end of December.
Bills will rise again under the January 2024 price cap, Cornwall Insight forecast. It expects annual bills will reach £1,900 per annum in the three months up to the end of March.
That’s still a decrease from the £2,053 cap in effect from July to the end of September and the £3,280 level set by Ofgem for March to June.
Billpayers were not subject to the average £3,280 annual bill as a government scheme, called the energy price guarantee, limited a typical household’s energy bill to £2,500 equivalent per year. This scheme ends on Friday.
While wholesale gas prices and electricity bills are falling, the main reason the average bill is coming down is because from October, Ofgem will revise downwards how much gas and electricity the average house consumes, impacting what an average bill is.
Every two years Ofgem reviews typical domestic energy consumption but this was interrupted due to the COVID-19 pandemic.
Using data on the average usage from 2019 and 2021, due to missed pandemic years, the regulator concluded residences in the UK are using less electricity and gas.
That reduction is due to rising energy prices, energy-saving measures and weather.
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The official price cap announcement for October will not be made until late August. But the price cap model came in for criticism by Cornwall Insight.
As the public grapple with still high bills, the principal consultant at the research firm said, “doubts about the cap’s effectiveness in protecting consumers and its impact on tariff competition become a regular part of energy discussions”.
Alternative measures – such as social tariffs and energy efficiency measures – should be examined, Dr Craig Lowrey said.
“It is crucial to explore alternative measures that can better protect consumers, promote fair competition, and ensure affordable and transparent energy pricing for all”.
“Any reductions in the price cap should not diminish the sense of urgency in implementing necessary changes. The protection of vulnerable households from high energy bills remains a pressing issue that requires immediate attention,” he said.