As a result, energy bills could drop by as much as £600 this summer as was previously anticipated. This is due to falling wholesale prices. This boosts households and the government.
According to Cornwall Insight analysts, the annual price cap is expected to fall to £3,208 by April and then to £2,200 by July and December.
This compares with their previous predictions for January, £3,545 in April and PS2,800-PS2,835 in September.
The wholesale prices will determine the actual price cap. This will be determined over the next few months. They were falling because of milder weather.
If it does not fall as expected, the government would stop paying subsidies to households after July.
But, household bills will be much higher than historical averages.
Principal consultant at Cornwall Insight Dr Craig Lowrey warned that there was still a lot of work to be done before the price cap beyond the summer is established. There are also many risks.
He stated that while declining wholesale markets and forecasts of cap growth may give you cause to be cheerful, there is no guarantee in the new European energy market.
“Reading too soon into falling prices could be as dangerous as reading too early into rising prices.
“Policy must be on notice of any sudden changes and flexible and responsive to such environments.”
The current price cap is £4,279. The Government has subsidised household bills to ensure that most households don’t pay more than £2,500 per year.
The state will reduce its support. This allows households to pay their typical bills up to £3,000.
The price cap for October 2021 was £1,277. The latest forecasts show that households will continue to pay much more than usual, but still below last year’s worst predictions.
Cornwall Insight predicted that energy bills would nearly double to £6,600 per annum by the spring of 2022. This was because Vladimir Putin had cut off Europe’s gas supplies, causing prices to soar.
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