According to Investec analysis, energy bills in the UK are expected to decrease to below £2,500 from July, providing some relief to those struggling with the high cost of living. The previous estimate of the cap on annual energy bills was £2,640, but it has now been revised down to £2,478 for an average bill during the summer. In the second half of 2023, the average annual energy bill is predicted to be around £2,500. These forecasts are significantly lower than Cornwall Insight’s prediction last week, which anticipated bills settling at approximately £2,800 from July.
The recent drop in wholesale gas prices, attributed to mild weather and high gas storage levels during winter, has contributed to the reduction in energy bills. However, the current bills are still significantly higher than pre-crisis levels in 2021 when households were paying around £1,200. Investec analyst Martin Young stated that the tariff cap estimates have been revised down to approximately £2,500 for the second half of 2023, following the drop in wholesale prices.
Under the UK government’s energy price guarantee (EPG), household energy prices are capped at £2,500 for a typical household. However, there is no limit on the amount that households can be charged depending on usage. The EPG cap will increase to £3,000 in April and will remain in place for the next 12 months. This article aims to answer the most frequently asked questions regarding forecasted energy costs for households. For more information, visit website.
What is the energy price cap and energy price guarantee?
The energy industry regulator Ofgem sets a price cap every three months to limit the maximum price that suppliers can charge households per unit of energy on a standard or default tariff. However, following a spike in energy prices due to Russia’s invasion of Ukraine, the government introduced a lower energy price guarantee to replace the cap temporarily. The guarantee currently stands at £2,500 and is set to increase to £3,000 per year for a typical household from April. Some energy companies anticipate continued government assistance, which could keep bills around their current levels. The energy price guarantee will be in effect until April 2024 and will apply to all households in England, Scotland, and Wales, with the same level of support available in Northern Ireland.
Am I considered a part of a typical household?
A typical household is defined as a direct debit customer who uses 12,000 kWh (kilowatt hours) of gas and 2,900 kWh of electricity annually. A kilowatt-hour is a unit of energy used to calculate the energy bill. However, it’s important to note that not all households fall under the “typical” category. The amount of energy you consume, which is the basis of your energy bill, is influenced by factors such as the number of people living in your home, the type of property you reside in, and its energy efficiency.
What is the additional support being provided for energy bills?
Starting in April, certain groups in the UK will receive additional help with their energy bills:
Households on means-tested benefits will receive £900 in three installments in spring, autumn, and spring 2024.
Pensioner households will receive £300.
People on certain disability benefits will receive £150.
When can we expect energy prices to decrease?
Global energy prices have been decreasing in recent months, and experts predict that households can expect cheaper prices later in the year. Analysts at Cornwall Insight predict that the energy price cap will fall to £2,153 in July and remain at that level for the rest of the year. This may make the government’s energy price guarantee redundant by July, allowing households to shop around for the best deal.
What measures are being taken to reduce energy bills?
A scheme running from November to March will reward households and businesses for using less peak-time electricity. Customers with smart meters can sign up for the trial, which will run for 12 “test days.” People who avoid using high-energy appliances during a set hour of each test day will receive up to £3 per kilowatt hour off their bill.
What assistance are businesses receiving?
Under the energy bill relief scheme, businesses receive a discount based on a “government-supported price” of 21.1p per kWh for electricity and 7.5p per kWh for gas. Businesses on fixed-price contracts are eligible if their deal began after April 1, 2022. Those on variable tariffs receive an automatic discount for each unit of energy used. The savings began appearing in November’s bills (backdated to October) and are automatic. The scheme applies to all non-domestic energy customers in England, Scotland, and Wales, with a similar scheme in Northern Ireland.
Unlike domestic customers, businesses were only promised help for six months until March 2023. After that, support for firms will be less generous, and they will receive a discount on wholesale prices rather than having their costs capped. Heavy energy-consuming sectors, such as glass, ceramics, and steelmaking, will receive a greater discount than others
What support has been provided to households so far?
During the period of October 2022 to March 2023, most households have received a one-time £400 discount on their energy bills. However, there has been no indication that this support will be repeated in the future. In Northern Ireland, households have received a larger payment of £600 due to the widespread use of heating oil.
Additionally, eight million low-income households that receive certain benefits or tax credits have been given £650 in two installments, while pensioner households received £300 and certain disabled individuals were given £150. Funding for this support was partly obtained through a temporary windfall tax on oil and gas companies. Moreover, vulnerable families have access to additional support through the Household Support Fund and the Warm Home Discount scheme.
Energy bills in the UK are expected to decrease to below £2,500 from July, providing some relief to those struggling with the high cost of living. The recent drop in wholesale gas prices, attributed to mild weather and high gas storage levels during winter, has contributed to the reduction in energy bills.
However, the current bills are still significantly higher than pre-crisis levels in 2021 when households were paying around £1,200. The UK government’s energy price guarantee (EPG) will cap household energy prices at £2,500 for a typical household, with additional support being provided for those on means-tested benefits, pensioner households, and people on certain disability benefits. While there is still uncertainty regarding future energy prices, experts predict that households can expect cheaper prices later in the year, with measures such as the energy bill relief scheme and rewards for using less peak-time electricity being taken to reduce energy bills.