Cornwall Insight’s Default Tariff Cap (price cap) forecasts for October to December 2024 have dropped.
The energy research organisation predicts that the price cap will lower to £1,723 a year for a typical dual fuel consumer, a reduction of just under £40 annually compared to the previous forecast released in May.
While the forecast price cap has lowered, it would still represent a 10% increase from the cap that will take effect on 1 July (£1,568 a year). The central reason for the predicted rise from the July cap is an uptick in wholesale market prices.
Geopolitical tensions and supply-demand pressures have a resulting impact on the price cap. Cornwall Insight has further said it expects the price cap to remain at a similar level into the January-March 2025 period.
Dr Craig Lowrey, principal consultant at Cornwall Insight said: “The drop in forecasts for October are positive, but we need to keep this in perspective. We are still facing an average 10% increase in bills from October, and as winter approaches this will put a strain on many household finances.
“While long-term solutions are being developed, it’s critical to focus on immediate strategies to manage energy bills. Most political parties have proposed reforms to how energy bills are structured, with a review of standing charges front and centre. However any change to bills creates winners and losers, so we urge whoever is in government come 5th July to proceed with caution. Additionally, we would encourage greater discussion on other reforms, such as social tariffs, which could support the pursuit of lower bills over the following months and years.”
UK politics put pressure on energy prices
A review of standing charges, as included across several political parties’ manifestos, would see network costs move to unit costs. This would benefit low-energy users, in theory encouraging households to lower their energy use and take up energy efficiency measures. That change must be balanced, though, to protect those in homes that are not fitted with energy-efficient measures – often vulnerable or low-income households.
As Current± explored in a recent blog post, the general election will greatly influence the direction of the UK’s net zero journey. Reforms that would see the UK’s power supply shift towards domestic, renewable generation sources hope to deliver sustained lower bills. However, Cornwall Insight says that such a transition would take time and investment, which makes it unlikely to see material bill reductions from those efforts until 2030 at the earliest.
Lowrey added: “Looking to long-term bill reduction, we’ve heard pledges about investing in wind farms, solar power, nuclear energy, and other renewable infrastructure from various parties. However, concrete details on the implementation of these plans are scarce. It’s essential to be transparent with the public, these initiatives require substantial investment – and therefore cost – and time to come to fruition. While renewables are the path to sustainable bill reductions, it will take a long time for households to see these changes reflected in their bills.”