UK energy bills expected to drop below £2,500 as gas prices fall | energy industry

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Energy bills are expected to fall below £2,500 from July as lower wholesale gas prices relieve some of the pressure on Britons struggling to deal with the cost of living crisis.

An analysis by Investec predicted that maximum annual energy bills would drop to £2,478 for the average bill in the summer, down from its previous estimate of £2,640 earlier this month, and an average of £2,500 per year in half. The second of 2023.

This forecast is significantly lower than last week’s forecast by consultancy Cornwall Insight for bills to stabilize at around £2,800 from July.

Wholesale gas prices have fallen in recent weeks as mild weather and high levels of winter gas storage have allayed some concerns about future Russian gas shortages. However, the bills are still much higher than they were before the energy crisis began in 2021, when households were paying around £1,200.

Investec analyst Martin Young said tariff cap estimates have eased again after wholesale prices fell, and now stand at around £2,500 for the second half of 2023.

UK household energy prices are set under the Government’s Energy Price Guarantee (EPG) at £2,500 for the average household – although there is no limit to the amount a household can charge, depending on usage. That cap rose to £3,000 in April for a further 12 months.

Lower wholesale gas prices will lower the cost of EPG to the treasury. Investec expects the cost of the policy for the next financial year to be £2.3 billion, down from around £3 billion previously.

The government announced this week that subsidies on energy bills for businesses will be cut from April to lower the Treasury bill.

The UK gas contract the next day traded 158p in the heat on Thursday, having reached more than 500p in the heat in August after Russia curtailed European gas supplies. The price hit 400p in the heat during a cold snap in early December, but has been dropping ever since.

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European gas prices have fallen to levels not seen since before Russia’s invasion of Ukraine last February.

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