Energy prices predicted to rise by even more than expected – what it means for your bills

Gas hob above an energy bill (images: Getty Images)

Gas and electricity bills look set to be higher than feared in 2024, after energy consultancy Cornwall Insight released its latest set of Ofgem energy price cap predictions.

The energy price cap dictates the price all households on standard tariffs pay for their energy – the vast majority of the country and essentially everyone not on a fixed deal. It changes every three months and is now forecast to rise in January and remain above the current level until the end of 2024.

Predictions have risen in response to growing volatility in the global wholesale energy market. It comes as households’ financial resilience is likely to be even lower than it was last winter as a result of the cost of living crisis.

Look After My Bills Editor-in-Chief Gary Caffell says: “If these predictions are right, then it’s going to be even tougher for households to heat their homes this winter and beyond. Without the £400 government support all households received last winter, most were already going to be paying more for their bills. And the latest data compounds the issue.

“I hope these new predictions serve as a wake-up call to the government. Without government intervention, even more households will be dragged into fuel poverty. And even more vulnerable households will face the stark and heartbreaking choice between heating and eating.

“If you’re struggling to pay your bills, make sure you’re getting all the help and support you are entitled to. Let your energy supplier know as soon as possible. They can give you access to hardship grants or set up payment plans based on your circumstances. There are also government schemes, such as the warm home discount and cold weather payments for those claiming certain benefits, so do check if you’re eligible.”

We’ve rounded up all the support available in our help with your energy bills article. For anyone considering a switch, we have all the latest information in our energy comparison guide.

How is the Ofgem energy price cap expected to change?

At present, the Ofgem price cap is the cheapest option for almost all households. There had been a fixed deal below the cap’s rate, but this was pulled after a sustained hike in wholesale prices (see more below).

These same wholesale costs have also now seen Cornwall Insight increase its forecasted price cap rates for 2024. While Cornwall Insight’s predictions are just that – predictions – and things can change quickly in the energy market, its analysts have routinely predicted future price caps fairly accurately.

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% - £1,923 a year - PREDICTION
1 April 2024 to 30 June 2024 UP 0.3% - £1,929 a year - PREDICTION
1 July 2024 to 30 September 2024 DOWN 2.5% - £1,880 a year - PREDICTION
1 October 2024 to 31 December 2024 UP 2% - £1,917 a year - PREDICTION

All figures based on Ofgem’s new typical usage figures for the average household over the course of a year (2,700 kWh for electricity and 11,500kWh for gas).

How will unit rates change?

As well as giving an overall figure, Cornwall Insight has also predicted what unit rates will look like going forward. Here, we’ve compared current rates to what they might now look like in January 2024.

Current energy price cap rates from 1 October to 31 December 2023 Predicted energy price cap rates from 1 January to 31 March 2024
Gas Unit rate: 6.89p per kWh. Standing charge: 29.62p per day Unit rate: 7.44p per kilowatt hour (kWh). Standing charge: 29p per day
Electricity Unit rate: 27.35p per kWh. Standing charge: 53.37p per day Unit rate: 28.45p per kWh. Standing charge: 53p per day

Is it worth switching off the Ofgem energy price cap?

At present, there are no fixed deals that are cheaper than the price cap. Octopus Energy had been offering a fix 1% below the existing rate, but it was pulled on 1 November due to volatility with wholesale prices. We’ve full info on the latest deals and what you need to consider when switching in our energy comparison article

There are some tariff options that can work out cheaper than the current price cap. It largely depends on how flexible you’re able to be with your energy use. For example, Octopus Energy’s Agile and Tracker tariffs closely follow wholesale prices, which can plummet when renewables make up most of the UK’s energy mix. But prices can also spike.

If you have an electric vehicle, you could also save by getting an EV tariff. These tend to offer several hours of cheaper off-peak energy overnight. Economy 7 tariffs, which work in a similar way, can also work out cheaper if you’re able to shift your usage to off-peak times.

But ultimately, the best way to save money on your energy bills at present is to reduce your usage – you can find out more in our in-depth energy saving tips guide. You could earn credit for doing so through the National Grid’s Demand Flexibility Service, which several major suppliers – namely: British Gas, EDF, Octopus Energy and Ovo Energy – are taking part in.

What should I do if I need help with energy bills?

The latest news is likely to mean the finances of people across the country will be stretched even further than they already have been. We’ve a full round-up in our energy bills support guide, but there are also several other government options out there that you may be eligible for. It’s worth checking to see if you can qualify for them, because they may take some of the strain off your budget.

  • Warm home discount:a £150 discount on your winter energy bill if you meet certain criteria.
  • Cold weather payment: pays £25 a week to people claiming certain benefits or other support when the average temperature in their area is zero degrees celsius or below over seven consecutive days.
  • Winter fuel payments: between £250 and £600 is available if you receive the state pension. How much you get depends on your age and circumstances.
  • Cost of living payments: the first instalment of £300 has been paid, with the second currently in the process of being rolled out. It may mean you’re only eligible for the third payment.
  • Household support fund: your local council may be able to give you financial support. See who your local council is with this government portal.

Why are energy prices rising?

The price cap had been predicted to rise slightly in January before dropping (compared to current levels) over the course of the rest of 2024. But now, Cornwall Insight expects prices will be above the current cap for the entirety of next year.

The reason for this is what the energy consultancy has called “growing volatility in the global wholesale energy market”. Specific events that have sparked the spike in prices include the Israel-Palestine war and disruption at a pipeline in Finland – something that has been blamed on Russian sabotage. While these events do not necessarily directly affect UK supplies, they create uncertainty and that usually ends up with prices rising.

Dr Craig Lowrey, Cornwall Insight’s principal consultant, explains: “The jump in price cap predictions since September has once again highlighted the vulnerability of UK energy prices – and customer bills – to geopolitical events. The Russian invasion of Ukraine demonstrated there is a delicate balance in the global energy market which can easily be disrupted by unexpected events, it looks as though the current situation is repeating that pattern.”