Greg Jackson, CEO of Octopus Energy, anticipates a significant reduction in the energy price cap from April, as a result of the suppliers’ forward-buying strategies.
In a discussion with the BBC at the World Economic Forum in Davos, Jackson mentioned that the cap, determined by Ofgem, is expected to decrease by “hundreds of pounds” in the spring season.
He pointed out that energy suppliers had secured gas supplies ahead of winter, leading to a drop in wholesale prices for the upcoming months.
Jackson highlighted, “The energy we are currently purchasing for the next few months is among the lowest priced in recent years.”
He added, “Despite the numerous global challenges, it appears that energy prices are on a downward trend and likely to stabilize in the short term.”
The Ofgem price cap is a reflection of the annual cost for a typical UK household, based on current rates, and sets the maximum charge suppliers can impose per kilowatt hour for gas and electricity.
This cap is influenced by wholesale prices and also considers network and operational expenses, as well as allowing suppliers to recover debts.
The April cap will include an allowance for recovering energy debts, which were reported to be around £3 billion towards the end of last year, as per Ofgem.
Cornwall Insight analysts had forecasted last month that the April cap would be around £1,660, a decrease of £268 from the £1,928 cap for January to March.
Ofgem is scheduled to announce the new cap price on February 23.
