Cornwall Insight has identified via the latest Default Tariff Cap forecasts for April to June 2023 that the average consumer is predicted to pay £3,702 from April as opposed to the previously projected £4,255.
This figure coincides with when the Energy Price Guarantee, which caps the unit price of energy at 34.0p/kWh for electricity and 10.3p/kWh for gas, inclusive of VAT, for those on a standard variable tariff, ends in April 2023.
This is a positive indication for consumers within the UK amid the energy crisis. However, despite this encouraging reduction, the prices consumers are expected to pay are still hugely above the £2,500 Energy Price Guarantee levels. Cornwall Insight predicts this will likely prompt calls for greater governmental intervention.
Cornwall Insight’s forecast per unit rate for the first quarter of 2023 for electricity stands at 66.76p/kWh which compares with 34.00 p/kWh under the Energy Price Guarantee. The figures for gas are 17.05p/kWh and 10.30p/kWh respectively.
In the second quarter, the cost for electricity is projected to reduce to 58.69p/kWh whereas gas also falls to 14.62p/kWh.
This means heavier financial losses for the government in protecting consumers which in early October had been touted as costing as much as £140 billion leading to increasing the government’s exposure to commodity price risk.
“Many will question why, when there have been significant declines in the wholesale market since record highs were reached in late August, these are not reflected in the January – March 2023 levels,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.
“Our forecasts for Q2 2023 onwards do illustrate the fall in the wholesale market, with these having dropped by around a quarter since the highs seen in August 2022. Despite these losses, the cap forecasts remain well above the annual sum of £2,500 per household under the Energy price Guarantee.
“With the enduring nature of support for household energy bills up for review in early 2023, the potential for volatility in energy bills will need to be addressed as part of any ongoing measures established.”
Last week, it was confirmed that the UK’s businesses and public sector organisations would see a discount on energy bills this month via the Energy Bill Relief Scheme.
The Energy Bill Relief Scheme aims to half the predicted MWh price for electricity and gas for businesses this winter to £211/MWh and £75/MWh respectively.
This has now been enshrined in the Energy Prices Bill which also includes the Energy Price Guarantee, a support measure that is designed to limit the jump in domestic energy bills.
