Millions of British households are set to find a little extra in their bank accounts this January, as a predicted dip in the energy price cap is expected to trim the average bill by around £22.
A Small Winter Reprieve
Energy regulator Ofgem is expected to confirm a slight reduction to its price cap this Friday, according to analysis from experts Cornwall Insight. The change, anticipated to be about 1%, will see the average annual bill for a typical household fall from £1,755 to £1,733.
This means customers of major suppliers like British Gas, EDF, EON, Ovo, and Octopus will see a small financial benefit after the Christmas period. However, this minor relief comes with a significant warning about the future.
The Bigger Picture for Energy Costs
Craig Lowrey, Principal Consultant at Cornwall Insight, cautioned that the January decrease is misleading. He stated, "Bills are still well above pre-crisis levels and are set to climb again in April, and this time it’s not higher wholesale prices driving the rise."
This sentiment was echoed by Richard Neudegg, director of regulation at Uswitch.com, who highlighted the ongoing struggle for families. "Energy prices look set to remain high into the new year, with little respite for households struggling as the winter cold sets in," he said.
An Impending Spring Price Hike
The more concerning news for bill-payers is the forecast for April. Analysts predict a substantial increase to the price cap, potentially adding around £75 to the average annual bill. This rise is primarily intended to cover costs for essential energy network maintenance and upgrades across the UK.
There is a potential wildcard that could alter this outlook. Rumours suggest the government may announce a cut to the 5% VAT rate currently applied to energy bills in the upcoming Budget. Such a move is not factored into current forecasts and could provide additional relief, but households will have to wait for the official announcement.
In the meantime, consumers are being urged to take action. Richard Neudegg pointed out that "Far too many are paying more than they need to for their energy by sticking with the default option."
He revealed that 26 fixed deals are currently available that undercut the existing price cap. For the average household, switching to one of these competitively priced fixed tariffs could lead to savings of approximately £185 a year, offering a much more significant financial cushion than January's small dip.
