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Cornwall Insight’s response to the announcement of the October price cap

The predictions for the Default Tariff Cap in this piece are out of date please click HERE to find our most up to date forecasts.

Ofgem has today announced the October Default Tariff Cap (price cap) at £1,923 a year for a typical dual fuel consumer1 for the final three months of 2023. This is based on the regulator’s current definition of an average household’s gas and electricity use2, and shows a 7% decline from July’s cap.

The average use, known as the Typical Domestic Consumption Value (TDCV), used to calculate the cap will be lowered by Ofgem with effect from October3. Under these new reduced consumption values, the cap will stand at £1,834 a year for a typical dual-fuel consumer.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:

While this modest drop in the cap won’t make a substantial difference to household energy bills, it is encouraging that prices from October are moving in the right direction. Unfortunately, our predictions for 2024 show prices continuing to languish well above pre-pandemic prices – something which is currently forecast to remain the case for the remainder of the decade.

The recent impact of the potential industrial action at Australian liquified natural gas (LNG) production facilities on wholesale energy prices across Europe, underscores the vulnerability of the country’s energy system to global events. While both the threat of Australian strikes and the impact of Russia’s invasion of Ukraine on energy prices have subsided for now, both highlight the risks such events pose to customer’s bills.

The debate around the merits and continued validity of the cap has been compounded by the current cost-of-living crisis. While there is no one simple solution to high energy costs, there are steps that can be taken. Protection of the vulnerable must be a primary concern, and the introduction of social tariffs such as those already in place for water and telecommunications remains an option.

Elevating demand-side strategies, like government funding for home insulation and energy efficiency enhancements, could lead to reduced bills. At the same time, a broader approach of prioritising domestically generated energy to lower the influence of the global energy market on UK prices would reduce the impact of international supply shocks.

Only through a comprehensive approach to tackling the issue of high energy bills, can we start to deliver a resilient and secure energy landscape for all.”

Figure 1: Cornwall Insight’s Default Tariff cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer)

QUARTERLY New TDCV Q1 2024 CI Forecast Q2 2024 CI Forecast Q3 2024 CI Forecast Q4 2024 CI Forecast
Electricity 2,700 kWh £977.14 £941.16 £912.27 £947.56
Gas 11,500 kWh £955.10 £926.53 £909.81 £926.58
TOTAL   **** £1,932.24 £1,867.69 £1,822.09 £1,874.14

Source: Cornwall Insight

Figure 2: Cornwall Insight’s Default Tariff Cap forecasts using current Typical Domestic Consumption Values (dual fuel, direct debit customer)

QUARTERLY Old TDCV Q1 2024 CI Forecast Q2 2024 CI Forecast Q3 2024 CI Forecast Q4 2024 CI Forecast
Electricity 2,900 kWh £1,036.85 £998.34 £968.66 £1,008.44
Gas 12,000 kWh £995.81 £966.13 £948.75 £966.48
TOTAL   **** £2,032.66 £1,964.47 £1,917.41 £1,974.92

Source: Cornwall Insight

Figure 3: Default Tariff Cap forecasts, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)

Electricity Q124 Forecast Q224 Forecast Q324 Forecast Q424 Forecast
Standing Charge (£/day)**** 0.52 0.60 0.60 0.60
Per Unit Costs (p/kWh)**** 29.48**** 27.12**** 26.12**** 27.31****

Source: Cornwall Insight

Gas Q124 Forecast Q224 Forecast Q324 Forecast Q424 Forecast
Standing Charge (£/day)**** 0.29 0.30 0.30 0.30
Per Unit Costs (p/kWh) 7.72 7.43 7.27 7.41

Source: Cornwall Insight

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.

Reference:

  1. All figures are for a customer paying by direct debit.
  2. Ofgem’s current Typical Domestic Consumption Values (TDCVs) are 2,900 kWh per annum for electricity and 12,000 kWh per annum for gas.
  3. Following a consultation process, Ofgem has revised the TDCVs, from October it will be reducing them to 2,700 kWh per annum for electricity, and 11,500 kWh per annum for gas.
  • Ends

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/

Copyright disclaimer for commercial use of the press releases:

The content of the press release, including but not limited to text, data, images, and graphics, is the sole property of Cornwall Insight and is protected by UK copyright law. Any redistribution or reproduction of part or all of the content in any form for commercial use is prohibited without the prior written consent of Cornwall Insight.

Media Use Exemption:

The information included in this press release may be used by members of the media for news reporting purposes only. Any other commercial use of this information is prohibited without the prior written consent of Cornwall Insight.

All non-media use is prohibited, including redistribution, reproduction, or modification of our content in any form for commercial purposes, and requires prior written consent. Please contact: enquiries@cornwall-insight.com

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.

"The debate around the merits and continued validity of the cap has been compounded by the current cost-of-living crisis. While there is no one simple solution to high energy costs, there are steps that can be taken."

Dr Craig Lowrey Principal Consultant
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