UK energy bills drop to around £2,200 from July as wholesale gas costs fall | energy bills

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Annual energy bills are expected to drop to around £2,200 from July in a boost to the government and households struggling with rising costs.

Energy consultancy Cornwall Insight has forecast that, excluding government support, typical annual household energy bills will fall from £4,279 now to £3,208 from April, and then drop to around £2,200 for the remainder of the year.

The forecast was about £300 a year lower than previously expected due to the recent drop in wholesale gas costs.

However, bills are set to remain well above the energy price cap of £1,138 before the gas price escalation in late 2021, exacerbated by Russia’s invasion of Ukraine.

Mild weather in Europe in recent weeks has reduced demand for gas and left gas reserves at storage facilities in Europe at higher levels than previously expected, easing concerns about a supply crunch and regular power outages. However, this week’s cold snap is expected to put pressure on the power grid.

Although wholesale gas prices have fallen sharply in recent weeks, it will take months to feed consumers’ bills as energy companies buy their supplies in advance.

The expected decrease in bills is positive for the government, which is supporting domestic and commercial energy bills.

The Energy Price Guarantee aims to limit average household bills to £2,500 until April and £3,000 for a further year after that.

It is estimated that the scheme would cost the government up to £42 billion, but this is now expected to be less than £37 billion – and far less than the estimated cost of between £72 billion and £140 billion when Liz Truss announced it. for an earlier version of the plan.

“The lower cost of the program is likely to spark discussion about the extra energy bill support the government may now be able to offer to households,” Cornwall Insight said.

There are growing calls for the government to harmonize a “social tariff” that offers cheaper bills to low-income households, as well as better protections for people who use prepaid meters.

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Bills were already expected to be higher than in April after the Energy Bill Support Scheme, which offered all households £400, ended.

Cornwall Insight warned that wholesale markets for gas were volatile during the energy crisis and that policy needed to be “flexible…in such an environment”. Concerns remain about the situation in the coming winter, with the possibility of greater competition from China for gas imports after the lifting of Covid restrictions and a shortage of Russian gas available in Europe.

Dr Craig Lowry, Principal Consultant at Cornwall Insight, said: “Positive gas storage and reduced demand in Europe mean the key winter period of concern looks better.

“But while the situation today is flat as you say, it is practically inevitable that the outlook will change again at some point as the market wanders around for its equilibrium, perhaps with lower peaks than last year, but not necessarily that prices return to what we define as the normal rate.”

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