Ofgem energy price cap ‘to fall 16%’ from April, Cornwall Insight predictions suggest

A lit gas hob with UK pounds in the background (images: Getty Images)

Energy bills are expected to fall 16% from 1 April, according to fresh Ofgem energy price cap forecasts. The analysis by energy consultancy Cornwall Insight suggests a typical household’s gas and electricity bill could drop to £1,620 a year.

The latest predictions come despite concerns prices would rise due to attacks on international shipping in the Red Sea by Houthi rebels in Yemen. They are the most accurate we’ve had so far for the April to June price cap given we are now two-thirds of the way through the assessment period for that cap (it’ll be announced on 23 February). However, things can still change, so these predictions are by no means guaranteed at this stage.

We’ve got all the latest information you need to make an informed decision about whether to fix or stay on the cap in our energy comparison guide. Our Will prices go down in 2024 guide includes a nifty calculator to help you work out the impact of the changes on your bill. And our explainer on the energy crisis can also help you to understand how we got here.

What is the latest Ofgem energy price cap forecast?

According to Cornwall Insight, energy bills for people on standard variable tariffs (ie, those sitting on the price cap), are forecast to drop 16% from 1 April 2024. Its previous predictions suggested a 14% fall would occur in spring, so the latest update is an improvement in its outlook.

If correct, it would mean the typical annual bill would drop from £1,928 under the 1 January to 31 March cap to £1,620. This would be the lowest price cap figure for two years. Cornwall has also lowered its forecasts for the July and October price caps although these could change significantly depending on what happens to wholesale prices:

Time period Price cap on new typical use figures
Old cap: 1 October 2023 to 31 December 2023 £1,834 a year
Current cap: 1 January 2024 to 31 March 2024 UP 5% - £1,928 a year
1 April 2024 to 30 June 2024 DOWN 16% - £1,620 a year - PREDICTION
1 July 2024 to 30 September 2024 DOWN 8% - £1,497 a year - PREDICTION
1 October 2024 to 31 December 2024 UP 3% - £1,542 a year - PREDICTION

There are two key reasons why we can be more confident about April’s prediction in particular. We are now two-thirds of the way through the price cap assessment period (16 November 2023 to 15 February 2024), so Cornwall Insight has had more data to work with. Secondly, Cornwall Insight has fairly accurately forecast movements in the price cap throughout the energy crisis.

The caveat is that a major geopolitical event could still drastically change wholesale prices. Towards the end of the January 2024 price cap assessment period, Hamas’s attack on Israel and Russian espionage in Finland sent prices rocketing. Cornwall Insight says UK energy prices remain “vulnerable” in the face of “global events”.

Why is the Ofgem price cap set to fall?

The principal reason why Cornwall Insight expects gas and electricity prices will fall is down to wholesale prices. These costs are paid by energy suppliers and make up the bulk of our energy bills.

There had been fears that wholesale prices would go up as a result of the crisis in the Red Sea. Some of the gas destined for Europe has been redirected around the bottom of Africa after dozens of attacks on international shipping from war-torn Yemen. But US gas supplies and low prices in Asia have both helped to push wholesale prices down.

Explaining why wholesale price forecasts have dropped, Cornwall Insight’s principal consultant, Dr Craig Lowrey, said: “Concerns that events in the Red Sea would lead to a spike in energy bills have so far proved premature.

“Healthy energy stocks and a positive supply outlook are keeping the wholesale market stable. If this continues, we could see energy costs hitting their lowest since the Russian invasion of Ukraine.”

However, he warned that a return to pre-energy crisis gas and electricity bill prices “isn’t on the horizon”. He said: “Shifts in where and how Europe sources its gas and power, alongside continued market jitters over geopolitical events, mean we are likely still to face costs hundreds of pounds above historical averages for a while. Potentially, this is the new normal for household energy budgets.

“Whether we can achieve long-term reductions in the UK’s energy costs will hinge on breaking free from the volatility of imported energy prices. To make a real and lasting impact, we need to commit to a sustained transition to homegrown renewable energy sources, reducing our reliance on the volatile international energy market.”

One thing Cornwall Insight says could still affect domestic energy bills from April is if standing charges are scrapped by Ofgem. The energy regulator’s consultation on the practice is ending this month.