Energy prices predicted to fall by 16% in April

Wholesale energy prices hit the second highest level in at least three years on Monday, adding pressure on suppliers struggling to secure electricity and gas at competitive rates.

Domestic energy prices will fall by 16% in April, according to a prediction by consultancy Cornwall Insight, bringing some relief to billpayers.

It said the annual household bill when using a typical amount of gas and electricity was expected to drop from £1,928 to £1,620.

Households have endured two years of high prices, but analysts suggest there could be a further fall in the summer.

Bills would still be higher than the pre-crisis norm.

The prediction is not guaranteed, as it will be another month before the regulator, Ofgem, sets its price cap for the second quarter of the year.

“Healthy energy stocks and a positive supply outlook are keeping the wholesale market stable. If this continues, we could see energy costs hitting their lowest since the Russian invasion of Ukraine,” said Craig Lowrey, principal consultant at Cornwall Insight.

How the price cap works

Under Ofgem’s price cap, the annual bill for a household in England, Wales and Scotland using a typical amount of gas and electricity, paying by direct debit, stands at £1,928.

However, if you use more, you will pay more because the price of each unit of energy is capped, not the total bill. Specifically, the price of gas is now 7p per kilowatt hour (kWh), and electricity is 29p per kWh.

If the forecast proves to be correct, the annual bill for typical usage would fall to £1,620 in April, a drop of 16%.

Cornwall Insight is then predicting a further fall to £1,497 a year in July, before rising slightly to £1,541 a year in October.

There remains uncertainty over wholesale oil prices owing to disruption in the Red Sea, and wider tensions in the region, but so far that has not affected prices. Supplies of liquefied natural gas from the US, and low prices in the Asian market, have kept prices down.

“Concerns that events in the Red Sea would lead to a spike in energy bills have so far proved premature, and households can breathe a sigh of relief that prices are still forecast to fall,” Mr Lowrey said.

“Though recent trends hint at possible stabilisation, a full return to pre-crisis energy bills isn’t on the horizon.”

Energy prices have been a central factor in the UK’s high inflation rate, which in turn has pushed up interest rates and the cost of borrowing.

Some households, particularly those in vulnerable situations, have struggled to cover bills – despite financial support from the government – and nearly £3bn is owed by customers to suppliers.

The regulator is proposing adding £16 to a typical household bill between April and March 2025 to give suppliers the funds to offer prepayment plans and write off debts.

Last week, Chris O’Shea, the boss of British Gas owner Centrica has said that his pay last year of £4.5m was “impossible to justify” when others were struggling.

Energy prices and the overall sector are regulated differently in Northern Ireland. Households tend to pay less than the UK average but businesses pay more.