Winter energy bills are forecast to drop by just 0.5% – equivalent to £13 a year – but only after a steep summer rise, according to new predictions from industry analysts Cornwall Insight. The modest relief comes as hopes of a lasting Middle East peace deal have begun to lower wholesale energy costs, though experts caution that households remain under severe financial pressure.
Summer Price Cap Surge
Ofgem’s price cap for millions of households will increase by 13% – or £221 a year – to an average of £1,862 from July 1. Earlier fears that the cap could rise again in October due to the fallout from the Middle East war and soaring wholesale costs have eased slightly, as wholesale prices have dropped amid ceasefire hopes.
Cornwall Insight now forecasts that the price cap will fall by 0.5% from October 1, bringing it to £1,849 per year. Looking further ahead, the consultancy predicts a slight further drop from January, but bills are still expected to remain above levels seen in the first three months of the year.
Geopolitical Uncertainty Persists
Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “The Iran ceasefire gave the markets some breathing room, but this is a pause, not a resolution to the conflict. What comes out of the final agreement, if there is one, will matter enormously for energy prices. And even in the best-case scenario, the enduring effects from the conflict will be with us for a while. Infrastructure takes time to repair, supply chains take time to recover, and households will be left dealing with the consequences for some time.”
He added: “October bills always hit harder than July’s because people are turning their heating on again, and this year that coincides with a difficult geopolitical backdrop. The new Prime Minister will face real pressure to act on support for vulnerable households, but the harder question is what comes after that – currently we are in a perpetual cycle of global shocks, high bills and short-term fixes. More permanent measures like social tariffs, moving levies into general taxation, or removing VAT on energy bills would take some of the pressure off bill-payers, but there is no firm steer that these options are being actively pursued by Government at the moment.”
Energy Debt Crisis Worsens
Campaigners have warned about the impact of this week’s jump in energy bills. New research from fuel poverty charity National Energy Action reveals how record levels of energy debt mean many households are in “persistent distress”, with money worries shaping their daily routines, leading to worsening health, and reducing their ability to cope or recover. The charity’s analysis shows that bad debt and recovery costs are adding around £50 to £70 a year to household bills through the price cap.
Adam Scorer, chief executive at National Energy Action, said: “Tomorrow’s cap rise is another blow for millions already struggling. The legacy of the energy crisis is millions of households locked into debt they cannot repay, and that is pushing up bills for everyone. If we fail to act, we risk seeing more households forced onto prepayment and effectively cut off from energy. That cannot be the answer to a problem caused by unaffordable bills.”
