The predictions for the Default Tariff Cap in this piece are out of date please click HERE to find our most up to date forecasts.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
Ofgem’s announcement that July’s Default Tariff Cap (price cap) will fall to an average1 £2,074 p/a, will undoubtedly bring some relief to those struggling with relentlessly high energy bills. Nevertheless, it is essential to keep this reduction in perspective. The cap is still nearly double the pre-pandemic average, and with our current forecasts showing no significant decreases on the horizon, we must confront the reality that the cap, while offering some limited protection, doesn’t do enough to shield many vulnerable consumers from the burden of unaffordable energy costs.
Looking beyond July, Ofgem is consulting on changes to the modelling and policy around the cap and the government is also looking at new measures which will impact household energy bills. While such moves could lead to lower prices beyond current predictions, there is no expectation that any of these changes will see a return to historic norms.
Those seeking alternative options to bypass the high cap prices through the return of fixed tariffs will need to manage their expectations, as the availability of deals below the cap is still uncertain. Even for those able to secure a below-cap rate, it remains a risky decision. There is a possibility that the cap could decrease, leading to consumers locked into higher-than-market prices.
Unfortunately, affordable energy bills can no longer be taken for granted by the government, as the underlying issues within the energy market will not simply resolve on their own. If policymakers truly want to regain control over bills, they must prioritise addressing the numerous long-term energy challenges confronting the UK. This means continuing to work towards fostering a competitive and sustainable energy market that promotes energy security, renewable generation, fair pricing, and consumer empowerment. Only by accepting that the cap is not the answer to lower prices, can we start to pave the way for a more resilient, affordable, and sustainable energy future.”
Figure 1: Cornwall Insight’s Default Tariff Cap forecasts (dual fuel, direct debit customer, national average figures)
| QUARTERLY | Q4 2023 (Oct-Dec) CI Forecast | Q1 2024 (Jan-Mar) CI Forecast | |
|---|---|---|---|
| Electricity | £1,033.67 | £1,055.99 | |
| Gas | £925.91 | £970.13 | |
| TOTAL | **** | £1,959.58 | £2,026.12 |
Figure 2: Default Tariff Cap forecasts, Per Unit Cost and Standing Charge including VAT (dual fuel, direct debit customer, national average figures)
| Electricity | Q423 Forecast | Q124 Forecast |
|---|---|---|
| Standing Charge (£/day)**** | 0.54 | 0.54 |
| Per Unit Costs (p/kWh)**** | 28.88 | 29.65 |
| Gas | Q423 Forecast | Q124 Forecast |
| Standing Charge (£/day)**** | 0.30 | 0.30 |
| Per Unit Costs (p/kWh)**** | 6.79 | 7.16 |
Reference:
- The average Default Tariff Cap is calculated using Ofgem’s Typical Domestic Consumption Value (TDCV) figures: 2,900kWh per annum for electricity and 12,000kWh per annum for gas.
Notes to Editors
For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com
To link to our website, please use: https://www.cornwall-insight.com/
About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.
"The cap is still nearly double the pre-pandemic average, and with our current forecasts showing no significant decreases on the horizon, we must confront the reality that the cap, while offering some limited protection, doesn't do enough to shield many vulnerable consumers."
Dr Craig Lowrey Principal Consultant
