Proactive Investors - Energy bills will fall below £2,000 from July, Investec analysts predict, as wholesale gas prices in Europe continue to fall.
Investec expects Ofgem’s price cap, which determines how much suppliers can charge per unit of energy, will fall to £1,981 from July and then to £1,966 in October for the average household on an annual basis.
This is a fifth lower than Investec's previous forecast for July, where it estimated Ofgem would set the cap at £2,478.
Given the government will reduce its funding for household bills in July, subsidising the average bill to £3,000 by capping how much people pay per kilowatt of gas and electricity, it will finally see an effective end to its support scheme, which began in October.
Government borrowing hit an all-time February high of £16.7bn this year, largely as a result of the support, with chancellor Jeremy Hunt adding it was spending around £1,500 per household this winter.
Ofgem’s lower cap will largely come as the result of falling gas prices, which sat at 96p per British thermal unit on Tuesday, down from an August peak of 640p, though network, policy and supplier operating costs also play a part.
Investec analyst Martin Young said the cheaper price cap, forecast to reach its lowest level since April 2022, was welcome, but was still far higher than households are used to paying.
He added people may be tempted to switch to fixed rates to avoid volatile markets hiking bills again this winter, but also suggested he expected more “innovative tariffs” to be launched.
“We need to be cognisant of the fact that when any annual estimate starts with a two, that’s still much higher than typical households are used to paying,” Young said.
“Some people will just want a fix for that piece of mind.”