A report reveals that as of July, annual household energy costs are anticipated to drop below £2,000, the lowest level since April 2015.
As part of the Energy Price Guarantee, Chancellor Jeremy Hunt stated in the Budget that government assistance will ensure that the average home cost will be capped at £2,500 per year for another three months from April to July.
Nevertheless, experts at Investec predict that the energy price cap, established by regulator Ofgem, will decrease to £1,981 from July and again to £1,966 from October as a result of lowering wholesale costs.
Households will immediately switch to the lower rate if the Ofgem cap drops below the Energy Price Guarantee. From July, the government maximum will increase to £3,000.
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This is the lowest energy rates will have been since the price cap of April 2022, which was superseded by the government cap last October, experts said.
Martin Young, of Investec, said the predicted reduction of costs was welcome, but “it does not disguise that these estimates are still considerably higher than historic levels, and challenging for many”.
A lower price cap could see the return of fixed rates, Mr Young said. However, fixes were unlikely to be cheaper than remaining on a capped variable deal because of industry rules, he added.
The Market Stabilisation Charge, enforced by Ofgem, requires providers to pay competitors if they poach a customer, which is then priced into energy bills.
Despite the higher prices, households may still be tempted to fix to avoid volatile prices, Mr Young said.
“We need to be cognizant of the fact that when any annual estimate starts with a 2 that’s still much higher than what typical households are used to paying,” he said. “But some people will just want a fix for that piece of mind.”
Mr Young said he expected to see more “innovative tariffs” launch and suggested tariffs that offer lower rates for electric vehicle drivers would become mainstream. He also called for further support for vulnerable customers.
Story adapted from The Telegraph
