Will energy prices go down in 2024?

A man looks at energy bills (images: Getty Images)

With the energy crisis having hiked gas and electricity bills significantly over the past two years, energy prices have been a big concern for households across the UK. But will they go down next year?

In October there was a 7% drop in the energy price cap. Though compared to last winter many of us are actually paying more, as we won’t be getting the £400 government support we got back then.

But what can we expect to pay for our energy use over the course of the next year? Taking into account the latest Ofgem cap announcement – as well as the most recent predictions – we have an energy price cap calculator for those paying by direct debit.

We look into that below, but if you just want to do an energy comparison, see our guide for how to find the best gas and electricity deals.

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Energy bills to rise 5% in January 2024

The start of 2024 will see a 5% rise in energy bills under the Ofgem energy price cap. The energy regulator’s cap limits what energy companies can charge those on standard variable tariffs (the vast majority of households) for each unit of gas and electricity, as well as standing charges.

This changes every three months and is largely driven by changes in the cost of energy on the wholesale market – what suppliers pay for the energy they sell us. Those costs rose substantially at the start of the energy crisis which led to a large number of suppliers going bust.

While wholesale prices have gradually fallen in 2023, they spiked again in October and November – largely as a result of the conflict in Gaza. They are also still a lot higher than they were before the energy crisis hit.

The energy price cap dropped an average of 7% on 1 October to £1,834 a year for a typical household’s use for the October to December period. However, in light of the latest wholesale prices situation, they will now climb 5% to £1,928 on 1 January 2024. This new price cap will apply from that date until 31 March 2024.

Below, we have listed the latest unit rates for direct debit customers sitting on the Ofgem cap. The figures are a UK average. If you want to see if you could save money by switching off the price cap, see how to do an energy comparison.

Current energy price cap rates from 1 October to 31 December 2023 New energy price cap rates from 1 January to 31 March 2023
Gas Unit rate: 6.89p per kWh. Standing charge: 29.62p per day Unit rate: 7.42p per kilowatt hour (kWh). Standing charge: 29.60p per day
Electricity Unit rate: 27.35p per kWh. Standing charge: 53.37p per day Unit rate: 28.62p per kWh. Standing charge: 53.35p per day

NEW: Energy price cap calculator

Use our simple energy price cap calculator for a ready reckoner of how much your household could expect to pay for gas and electricity in 2024, if you pay by direct debit. This includes the now confirmed January-March price cap level, plus the latest price cap predictions (which can change) for the rest of the year.

Will energy prices go down next year?

The price cap is expected to fluctuate a fair bit over the next year. But bills will ultimately get cheaper than they are now.

Analysts at Cornwall Insight publish regular forecasts for where the cap is likely to go over the coming year, based on movements in the wholesale markets. Here’s what they think will happen (last updated on 23 November 2023):

Time period Price cap on new typical use figures
Old cap: 1 Jul 2023 to 30 September 2023 £1,976 a year
Current cap: 1 October 2023 to 31 December 2023 DOWN 7% - £1,834 a year
1 January 2024 to 31 March 2024 UP 5% - £1,928 a year
1 April 2024 to 30 June 2024 DOWN 6% - £1,816 a year - PREDICTION
1 July 2024 to 30 September 2024 DOWN 1% - £1,793 a year - PREDICTION
1 October 2024 to 31 December 2024 UP 2% - £1,834 a year - PREDICTION

Note, Based on Ofgem’s new lower typical use figures of 2,700 kWh for electricity and 11,500kWh for gas. So annual prices may look cheaper than they are in reality when comparing the new figures with the old. 

Should I switch energy tariffs?

The energy price cap only applies to standard variable tariffs offered by energy suppliers. These are the tariffs that you move onto once your initial fixed or variable tariff has come to an end. As suppliers pulled their fixed tariffs when the energy crisis hit, most of us are now on these tariffs.

The prices in the table above are for the price cap. But, if wholesale prices fall further and look likely to remain consistent, fixed deals that undercut the price cap could start to become available again.

It’s worth keeping an eye on our energy comparison page for info on what deals are out there as we are finally starting to see a handful of suppliers launching fixed tariffs. Some are for existing customers only – so do check with your supplier first to see what it is offering.

The benefit of fixed tariffs is it offers greater certainty over your repayments, since you know exactly what your gas and electricity rates will be each month for a year. It’s not a straightforward decision, however.

The energy price cap changes every three months. If it was to fall, it may be that you end up spending more through a fixed tariff than you would have done if you had stayed put, as you’d be locked into a pricier fix with high exit fees.

We’ve full pros and cons of switching in Should I fix my energy?. And if you’re ready to switch, take a look at the open-market fixed tariffs available via our sister site, Go.Compare.

And remember to look beyond the initial quote and instead compare unit cost for gas and electricity, as well as the standing charge. That way, you can compare it to what you’re currently paying and get a more informed idea of what your bills are likely to be if you switch.

Can I get help with energy bills?

Energy bills remain incredibly expensive. As a result, there will be a large number of households that are struggling to pay them.

The good news is that there is help available. Individual energy suppliers have hardship funds on offer which could provide some breathing space. Our help with energy costs article has rounded up all the support available and what you need to do if you’re struggling to pay your energy bill.

Ultimately, the biggest influence on the size of your energy bills will be your own usage, so finding ways to reduce that usage is a good idea. Check out our guide for ways to reduce your energy use.

Why are energy bills so high?

There are a few reasons for high energy bills. They have mainly been driven by the Russia-Ukraine war.

Russia’s invasion in February 2022 led to cuts in its gas supplies to Europe. This resulted in European natural gas prices soaring as the region scrambled to find alternative sources for their energy needs, and ultimately led to a surge in prices across the globe.

Britain actually only ever depended on Russia for a small percentage of its gas. But it’s still connected by pipeline to the wider European market, which was dependent on Russia for 40% of its gas needs. It means British energy suppliers are impacted by international energy prices.

Price rises have been astronomical. For example, at the start of 2021, UK gas was at 38p per therm. In August 2022 it went up to 537p per therm. As a result, dozens of UK energy suppliers went bust in 2021.

UK households have the added disadvantage of mostly having homes heated by gas boilers (85% of homes compared to fewer than 50% in France and Germany) and around 40% of our electricity is generated by gas-fired power plants.

While wholesale prices have come down, they spiked in October and November largely as a result of the Israel-Gaza conflict. Energy markets feared it could lead to a wider war in the Middle East, where a significant percentage of global gas supplies are produced. Prices have now come down slightly as fears of the violence spreading have eased.