Energy bills tipped to finally drop in autumn after price plunge lowered inflation | Personal Finance | Finance

Britons are set to see their energy bills drop by on average £148 a year from October.

Figures from Cornwall Insight are predicting bills for a typical household will fall from the current £2,074 a year to £1,926, when Ofgem next updates the price cap.

Researchers said the consumers are more likely to look for fixed tariffs for their gas and electricity given the current “volatility” with the price cap.

The group has set out that under the current metrics for a typical dual fuel household, electricity costs will drop to £980.90 a month while gas bills fall to £944.81 a month, with a total of £1,925.71.

Ofgem is changing how it measures what constitutes typical usage. Under the new system, a typical home is predicted to pay £920.70 a month for electricity and £903.20 for gas, or £1,823.89 a month in total.

The regulator decided to change its measure for what constitutes a typical household usage, reducing the measure for electricity from 2,900 kWh a year to 2,700 kWh and for gas from 12,000 kWh a year to 11,500 kWh a year.

Following a consultation, Ofgem decided to remove data from 2020 in its measurements for typical usage, as this year’s usage was particularly high during because of COVID-19.

Dr Craig Lowrey, principal consultant, said: “While a small decrease in October’s bills is to be welcomed, we once again see energy price forecasts far above pre-crisis levels, underscoring the limitations of the price cap as a tool for supporting households with their energy bills.

“As many, including energy regulator Ofgem have acknowledged, it is essential that the Government explore alternative solutions, such as social tariffs, to ensure stability and affordability for consumers.”

Researchers said the consumers are more likely to look for fixed tariffs for their gas and electricity given the current “volatility” with the price cap.

Mr Lowrey commented: “This slow reduction in bills, coupled with the volatility associated with the price cap, has seen many consumers taking advantage of the return of fixed price tariffs.

“Such an option is a two-sided coin, while many find comfort in locking in energy prices after the turbulent bills of the past couple of years, the potential for the price cap to dip below fixed rates is also worthy of consideration.

“With so many unknowns in the energy market, each household must decide for themselves what is the best avenue for them.”

Energy experts at Uswitch.com said energy rates continuing to fall will be “welcome relief” for consumers. Natalie Mathie, from the group, said: “If the cap is confirmed at this level, then the price of energy for the average household will be seven percent lower during October, November and December — but these are some of the coldest months of the year and when households use more energy.

“Despite another drop in rates, bills are still high when compared to pre-crisis levels, so households will still need to be mindful of their energy usage over winter.

“If the prediction is accurate then the average household would save £49 between October and December based on higher usage in these months.”

Ofgem is to announce the new price cap for October on August 25. Cornwall Insight has predicted the price cap wil go up again in January, increasing to £1,979 a year under the new metric, or to £2,082 under the previous measures.

Ms Mathie said: “This cap will only be in place until the end of the year, and Cornwall Insight predicts that rates will rise again in January — to above the current July price cap rate — when usage peaks over winter, so this slight drop may only be temporary. 

“Relying on the price cap means that your energy costs can go up or down every three months, so some households may value the certainty of locking in a fixed deal before rates rise again.”

Greg Marsh, CEO of household money-saving tool Nous.co, told Express.co.uk: “Lower energy bills are of course welcome, but this is by no means the end of painfully high costs. 

“Bills are still going to be close to double what they were before the energy crisis – an unaffordable level for millions of families.

“We’re calling on the government and Ofgem to redouble their efforts to encourage competition in the energy market so consumers can access cheaper deals.

“Fortunately there are smart ways to save on your energy bills – Nous can save most households the better part of £150 without needing to commit to a fixed tariff deal.”

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