- Next price cap will still be higher due to Iran conflict but forecast has fallen
The energy price cap that governs most people’s bills could be less than previously feared from July, according to a respected forecaster.
The price cap is set every three months by regulator Ofgem and limits the amount households pay per unit for energy, if they are not on a fixed or different tariff.
Tomorrow, 1 April, the price cap will fall by £117 a to £1,641 a year for a typical household.
It is decided two months in advance, so April’s cap was set in February, before wholesale prices began to surge.
The price cap for July will be announced in May, and is likely to jump because of surging oil and gas prices on the back of the conflict in the Middle East.
However, forecaster Cornwall Insight has reduced its estimate, cutting it to £1,929 per year for a dual-fuel household with average usage.
Watching the pennies: Energy prices are set to rise from July – but the forecast has been reduced from what was previously expected
While this would still represent a £288 or 18 per cent rise from April’s cap, it is £44 lower than Cornwall Insight’s previous prediction of £1,973 per year, made on 19 March. On 4 March, it had predicted that the cap would be set at £1,801.
Cornwall Insight said it had pared it back because of a ‘partial steadying in wholesale markets after a pause in energy infrastructure strikes and signals of a potential ceasefire in the Middle East conflict.’
Wholesale gas prices surged after the Middle East conflict disrupted tankers moving through the Strait of Hormuz, a major route for global Liquified Natural Gas, and damaged key oil and gas facilities.
The situation remains volatile, and it is likely the forecast will change again – though it is almost certain July’s price cap will be higher than April’s.
Cornwall Insight said: ‘Unless wholesale prices fall below pre-conflict levels – which looks unlikely given the scale of disruption and the uncertain repair timeline to key infrastructure in the region – a higher price cap in July is effectively unavoidable.
‘The size of the increase depends on the duration of the conflict. It is worth noting that current wholesale costs remain well below the extremes of 2022, which means that, despite the turbulence, the scale of this crisis is not yet comparable to the price shock households faced three years ago.’
Households looking to fix their gas and electricity tariffs still have options available, though many suppliers pulled or repriced deals in the wake of the conflict.
There are no fixed deals available which beat the April price cap, with the cheapest coming in at £9 more expensive.
However, fixing for a year at that price could save you money if the cap rises in July. Compare the best fixed energy deals with This is Money and Uswitch here.
Tomorrow’s change to the energy price cap comes alongside a raft of annual rises for households, including hikes to water, broadband and council tax bills.
The rising price of wholesale oil and gas will also have a knock-on effect on food prices.
Grocery inflation is also forecast to increase to 8 per cent by June if global energy markets remain under pressure, according to analysts at the Institute of Grocery Distribution.