Cornwall Insight has confirmed that the latest forecasts for the Default Tariff Cap have seen energy bill predictions fall to £3,208 from April 2023 as a result of positive gas storage and demand reductions in Europe.
The price is set to fall even more between July and August in addition to September and December, with the expected figure standing at approximately £2,200.
These forecasts are around £300/year lower than the previous forecasts with the energy analytics company having expected energy bills to settle at around £2,800 for the second half of 2023.
Despite this, the organisation believes that a typical household will be paying nearly three times the amount on energy bills as was expected pre-pandemic.
The forecasts show that prices in the second half of 2023 are likely to remain below the Energy Price Guarantee (EPG) level, and so will not cost the government any money from July – a major boost for the UK.
The EPG is still expected to cost the government £37 billion for the period to 31 March 2024 however, which will ultimately need to be recovered from the taxpayer.
The EPG was introduced initially in September by then-prime minister Liz Truss, and overriding the price cap in October, which was set to rise to £3,549. At its current level it limits the cost of energy for those on a standard variable tariff to 34.0p/kWh for electricity and 10.3p/kWh for gas.
In his Autumn Statement, chancellor Jeremy Hunt announced that instead of running at this level for two years, it would instead rise to £3,000 for an average household from April. The government expects the EPG to save the average household around £900 this winter, as well as £500 in 2023/24 at its increased rate.
The European market outlook appears to be in a much healthier position in contrast to the year previous. This has been supported via a mild winter, meaning less gas has been used leading to an increase in storage levels.
Despite this positive boost for the continent, price volatility remains in the market and Cornwall Insight expects more fluctuations as we progress further into 2023.
With this continued volatility in the wholesale market, Cornwall Insight has stated that gas prices are “searching out a floor and a ceiling level in novel circumstances” with the firm also believing that both the UK and Europe will become increasingly dependent on liquified natural gas (LNG) as a result.