Annual energy bills predicted to fall by £22 in January

Household energy bills are expected to fall slightly in the new year before rising again in April, according to consultancy Cornwall Insight.

The forecaster expects the annual bill for households using a typical amount of gas and electricity will be £1,733 between January and March, when the latest energy price cap is set on Friday.

That would be a drop of £22 per year, or 1%, from the current £1,755 price cap which applies between October and December.

Dr Craig Lowrey, principal consultant at Cornwall Insight, warned the decrease is "only part of the picture", as government policy will replace high wholesale prices as the main driver of higher bills by Spring.

The energy price cap covers around 22 million households in England, Wales and Scotland and is set every three months by energy regulator Ofgem.

It sets the maximum amount suppliers can charge customers for average energy usage.

It is based on the cost of each unit of energy, not the total bill - so those who use more energy, pay more.

Cornwall Insight is widely respected for the accuracy of its predictions. It said it expected typical annual bills to rise by £75 from April when the next price cap is set, citing rising charges associated with Britain's transition to net zero.

It marks a shift in the main driver of energy bills from sky-high wholesale prices to the cost of overhauling and maintaining the country's energy networks, the forecaster added.

Dr Lowrey said: "The shift to renewables will bring long-term stability and energy independence, but it's not free.

"The upfront costs are real, and they're landing on bills now. The challenge will be balancing short-term affordability with long-term resilience, and crucially making sure people understand why that trade-off matters."

A spokesperson for the Department for Energy Security and Net Zero (DESNZ) said: "We know bills are still too high", pointing to support including its expansion of the £150 Warm Home Discount to an additional 2.7 million people.

"The only way to bring down energy bills for good is with our clean energy superpower mission, which will get the UK off the rollercoaster of fossil fuel prices and onto clean, homegrown power that we control," the spokesperson added.

Ofgem's price cap hit a record high in January 2023 of £4,279 as energy prices spiralled in response to the easing of Covid restrictions and Russia's full-scale invasion of Ukraine.

The government's energy price guarantee, which ran until June 2023, shielded consumers from the soaring cost, replacing the price cap and limiting average annual bills at £2,500 for a typical household.