Forecast Drop in UK Energy Price Cap to Save Typical Households £138 Annually
Cornwall Insight forecasts that Britain's energy price cap will fall by 8% in April 2025, reducing the typical dual-fuel household bill by £138 to £1,620 per year. This comes after Ofgem's cap is expected to rise slightly by 0.2% to £1,758 from January 1, 2025. The price cap, which is updated quarterly, remains sensitive to wholesale gas prices and policy costs.
The forecasted reduction follows measures announced in the autumn budget that shifted some charges to general taxation, ended the energy company obligation, and lowered renewables obligation costs. Despite this lower cap, households are still expected to contribute for £28 billion worth of grid upgrades, which could add approximately £108 per year to bills by 2031.
The government aims to reduce household bills while promoting clean power generation through plans to move levies onto general taxation and expand clean technology adoption in homes under the warm homes plan, which currently focuses more on solar energy rather than insulation. A new levy framework is planned to shift future levy costs off bills and onto general taxation; however, officials emphasize that this change redistributes costs rather than eliminates the net cost.
The movements in the cap are influenced by factors including a milder European winter, higher US gas supplies, and changes to grid cost forecasts. It is important to note that the price cap does not apply to Northern Ireland.
