Energy Prices Set To Drop By 7% this summer

Energy costs for UK households are projected to fall by seven per cent from this July, with the average annual bill dropping to £1,720, according to the latest forecast from Cornwall Insight. The adjustment follows decreases in wholesale gas prices, attributed to factors such as recent tariff policies in the United States and milder weather conditions.

This anticipated reduction, equating to savings of approximately £129 per household, will reverse the price cap increase implemented in April. However, the forecast is slightly less optimistic than prior estimates of a nine per cent decrease, as updated assessments factored in rising wholesale prices and policy levies.

The energy price cap, established by the government in 2019, limits the maximum amount suppliers can charge customers on standard tariffs. Ofgem, the UK’s energy regulator, adjusts the cap every three months to reflect supplier cost estimates. A confirmation of the July-September pricing cap level is expected this Friday.

Cornwall Insight expects further, albeit modest, declines in energy prices later this year, with potential drops in October and January. However, concerns about affordability persist, as prices remain well above historical averages. Energy debt levels, fuelled by prolonged high costs, continue to pose challenges to many households.

Dr Craig Lowrey, principal consultant at Cornwall Insight, welcomed the forecast reduction but underscored the need for ongoing support. He highlighted the importance of targeted measures, such as social tariffs, to protect vulnerable households amid the cost-of-living crisis.

Consumer advocacy group Which? suggests that this summer could offer an opportunity for households to explore more competitive fixed-rate deals. With energy prices expected to remain volatile, the group advises selecting 12-month deals below the price cap and avoiding contracts with steep exit fees.

While the predicted drop in energy prices provides some breathing space for households, the overall market remains challenging. Policymakers and industry leaders alike must continue working to address the affordability crisis and ensure accessible energy solutions for all.