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UK Energy Bills Set to Drop 15% in Boon for Taming Inflation - BLOOMBERG
BY , Bloomberg News
, Source: Ofgem, Cornwall Insight
(Bloomberg) -- Energy bills for UK households are forecast to fall from April, cutting the typical annual bill by £293 ($369) and helping to lower inflation.
Energy consultancy Cornwall Insight Ltd. predicts the typical tariff will drop to about £1,635 from the current cap as wholesale gas and electricity costs ease. Ofgem is set to announce the new energy price cap, which determines the maximum tariffs suppliers can charge most households in Britain, on Feb. 23.
A downturn in industrial demand, alongside strong gas supplies and a mild winter means wholesale energy prices have continued dropping this year. That decline will cut household bills, but prices will remain significantly higher than in 2021, before the energy crisis that escalated after Russia’s invasion of Ukraine.
This “is certainly welcome news,” Craig Lowrey, principal consultant at Cornwall Insight, said in a phone interview. “But it needs to be taken in the context of these rates still being above pre-crisis levels.”
Prices are expected to continue dropping at the July price cap by about £169, followed by a moderate increase in October, the consultancy said. Still, risks remain.
“Despite the positive outlook, the UK’s strong reliance on imported LNG means geopolitical insecurities remain a threat to energy supplies and therefore consumer bills,” Cornwall Insight said in a statement on Friday.
The rise in household energy prices between December and January, as the regulatory cap increased slightly, was one of the factors that caused inflation to hold at 4% for a second month in January. A fall in bills in April could help to drive inflation below 2%.
“The April drop in the price cap is a big reason why we see inflation falling below 2% in the spring and the economy picking up pace this year following a disappointing end to 2023,” said Dan Hanson, senior UK economist at Bloomberg Economics. “The estimates for the 3Q24 cap are also striking — a 10% drop in the summer could mean inflation stays below 2% until the final months of the year.”
