Cornwall Insight has announced its final forecast for the April – June Q2 2024 Default Tariff Cap (price cap) following the closure of the observation window[^1] on 15 February.
Based on our analysis, for a typical dual fuel household[^2] we predict the April price cap to be: £1,656 per annum. This is a fall of 14% from the current price cap which was set at £1,928 per year for a typical consumer.
Our figure includes the new £16 bad debt allowance[^3], however its inclusion in the cap has not yet been officially confirmed by Ofgem. There also remain a number of ongoing consultations4 by Ofgem into the level and composition of the cap, the outcome of which is unknown at present. As such, there is the prospect of additional costs being included in the cap, which are not in our forecasts, once the regulator has made its decisions.
Cornwall Insight is forecasting the cap will continue to decline in July, with a small rise in October. However, the latest projections indicate that the cap will stay below the current level until the end of the year.
Lower overall price cap predictions suggest the UK has, for now, weathered the storm of Red Sea tensions, securing a steady supply of LNG through the Atlantic. Good availability of cargoes in Europe and Asia, in part due to mild weather, has contributed to the drop in prices.
Despite the positive outlook, the UK’s strong reliance on imported LNG means geopolitical insecurities remain a threat to energy supplies and therefore consumer bills.
The official cap announcement by Ofgem is scheduled for 23 February.
**Figure 1: Cornwall Insight’s Default Tariff Cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer) **
| QUARTERLY | New TDCV | Q2 2024 CI Forecast | Q3 2024 CI Forecast | Q4 2024 CI Forecast |
|---|---|---|---|---|
| Electricity | 2,700 kWh | £862.65 | £776.75 | £820.93 |
| Gas | 11,500 kWh | £793.02 | £686.12 | £700.08 |
| TOTAL | £1,655.66 | £1,462.86 | £1,521.02 |
Source: Cornwall Insight (Market close 21 February 2024)
Figure 2: Default Tariff Cap forecasts, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)
| Electricity | Q224 | Forecast Q324 | Forecast Q424 Forecast |
|---|---|---|---|
| Standing Charge (£/day) | 0.58 | 0.58 | 0.60 |
| Per Unit Costs (p/kWh) | 24.06 | 20.87 | 22.29 |
| Gas | Q224 Forecast | Q324 Forecast | Q424 Forecast |
| Standing Charge (£/day) | 0.30 | 0.30 | 0.31 |
| Per Unit Costs (p/kWh) | 5.96 | 5.02 | 5.10 |
*Source: Cornwall Insight (Market close 21 February 2024) *Note: All figures are national average unless otherwise stated. All intermediate and final calculations are rounded to two decimal places. Totals may not add due to rounding.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
“Forecasts show energy bills returning to their lowest levels in over two years, providing a much-needed respite for a nation struggling with a cost of living crisis.
“Fairly healthy gas supply across the Atlantic, coupled with high storage levels in Europe, are helping to keep bills down. But we mustn’t get too complacent. Our energy system is still walking a tightrope, and we cannot be sure another political or economic crisis won’t send bills straight back up.
“Even with the drop, prices will remain a struggle for many. We need to remember, bills remain hundreds of pounds above pre-pandemic levels, and if we don’t speed up the switch to sustainable energy and cut down on volatile imports, they are likely to stay that way.”
Reference:
- The period of time Ofgem use to monitor the market and calculate the wholesale element of the cap.
- As of October 2023, Ofgem’s Typical Domestic Consumption Values (TDCVs), are set at 2,700 kWh per annum for electricity, and 11,500 kWh per annum for gas.
- Energy regulator sets out proposals to help ensure customers at risk of getting into debt are better supported – Ofgem
- Changes to the timing and availability of price cap inputs – Ofgem Notes to Editors
For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com
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Want to keep up to date with Cornwall Insight’s price cap predictions? We have launched a dedicated webpage that will be regularly updated with our released predictions. This page also offers helpful answers to frequently asked questions about the price cap. Don’t miss out on this valuable resource – check out the page today: Predictions and Insights into the Default Tariff Cap
**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.
"Fairly healthy gas supply across the Atlantic, coupled with high storage levels in Europe, are helping to keep bills down... but we cannot be sure another political or economic crisis won’t send bills straight back up."
Craig Lowrey Cornwall Insight
