Energy economics analysts Cornwall Insight expect the household price cap operating from 2023’s third quarter will be the equivalent of £2,053 per year. Ofgem’s official announcement is due on Thursday.
July sees a return to relevance of the regulator’s price cap, as months of protection provided by the government’s Energy Price Guarantee is withdrawn.
“Despite the cap falling from the sky-high prices of the past two years, the figure remains over £1,000 per year more than the price cap levels seen prior to the pandemic”, say the advisors.
“We do not currently expect bills to return to pre-2020 levels before the end of the decade at the earliest”.
The respected consultancy’s predictions are a fall from the April cap, a nominal £3,280 for the typical household.
Its latest figure is calculated following the closure of the observation window last week. That’s the period Ofgem uses to calculate the wholesale element in the cap.
Two major consultations remain open within Ofgem regarding the composition & structure of the cap. But their outcomes will arrive too late to effect the July quarter’s cap, Cornwall observes.
Aside from the consultants’ gloom about years more of high charges, they see the emerging stablisation of wholesale rates providing conditions for suppliers to bring forward competitive fixed-rate deals.
Cornwall Insight’s principal consultant Dr Craig Lowrey commented “Under these predictions, an average consumer would see bills drop by around £450 compared to the existing levels of the Energy Price Guarantee, with bills currently predicted to stay relatively stable over the next nine months.
“As many people continue to suffer from the cost-of-living crisis, this will hopefully bring some cautious optimism that the era of exceptionally high energy bills is behind us,”
“That is unfortunately where the good news ends. 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.
“The forecasts call into question the cap’s purpose and its continued place in the energy market. While it has provided some level of protection for consumers against market volatility, it is clearly still not shielding the most vulnerable from enduring severe financial hardship. As our forecasts into 2024 indicate, energy bills will remain at levels that are still unaffordable for many.
“The cap was never intended as a permanent solution and we urge, as we have done previously, for a comprehensive review of the cap and the exploration of alternative mechanisms, such as social tariffs, that can effectively safeguard the most vulnerable. It is crucial to prioritise the development of sustainable solutions that address the affordability challenges faced by energy consumers”.