Energy bills could be capped at £150 lower than original estimates come July, according to Investec, suggesting good news for households and the government.
Investec expects Ofgem’s energy price cap level to fall repeatedly with wholesale gas prices from £4,279 currently, to £3,317 in April, and then to July’s estimate of £2,478,
Ofgem’s cap will still be higher than October 2021’s figure of £1,277, Investec added, but the falling price will be good news for the government, which will see its energy price guarantee bill slashed.
The government subsidises household bills over an annual value of £2,500 currently, with this set to rise to £3,000 in April.
This is separate to Ofgem’s cap, which governs the amount suppliers can charge for energy, meaning if prices fall, it will pay less in subsidies.
Gas saw a sudden hike in value after Russia invaded Ukraine last year, causing energy prices to spike, but wholesale costs have now fallen to pre-war levels following warmer weather in Europe and higher levels of storage.
Priced at US$3.8 per British thermal unit on Thursday, it compares to a peak price of almost US$9 in August.
Invested added the price cap will likely rise again to £2,546 in October as winter approaches and demand for fuels increases, but that the updated forecasts were a “boost to households and the government”.