The predictions for the Default Tariff Cap in this piece are out of date please click HERE to find our most up to date forecasts.
Forecasts for the April 2024 Default Tariff Cap (price cap) show a fall of 14% in the second quarter of the year, with a typical dual fuel consumer1 expected to pay £1,660 per annum, a £268 decrease from January bills of £1,928.
This trend is currently expected to persist throughout the year, falling to £1,590 in July before a slight increase to £1,640 from October.
Since mid-November, wholesale energy prices have experienced a significant decline, triggering the anticipated drop in the price cap. Contrary to initial concerns, the Israel-Hamas conflict and problems such as potential LNG production strikes in Australia have as yet failed to materially impact energy supplies. Additionally the absence of further pipeline disruptions, similar to the Finnish Balticconnector rupture, further bolstered confidence in energy security. These factors, coupled with a relatively mild winter to date, have left European gas-in-store levels above expectations for the remainder of winter. This situation has helped to drive down wholesale prices, as seen in the current forecasts of the price cap.
While forecasts have improved for now, global events such as the pandemic, the Russian invasion of Ukraine, and the conflict in Gaza have highlighted the susceptibility of UK energy prices to external factors. Prices may therefore rebound if future incidents, such as the disruption to shipping through the Red Sea, raise concerns over disruption to supplies.
Additionally, there are ongoing consultations on potential changes to the price cap, including the standing charge and bad debt collection, which could impact the overall price cap level.
Figure 1: Cornwall Insight’s Default Tariff Cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer)
| QUARTERLY | New TDCV | Q224 CI Forecast | Q324 CI Forecast | Q424 CI Forecast |
|---|---|---|---|---|
| Electricity | 2,700 kWh | £863.74 | £820.74 | £855.08 |
| Gas | 11,500 kWh | £796.32 | £769.62 | £784.89 |
| TOTAL | £1,660.06 | £1,590.36 | £1,639.97 |
*Data from market close 19/12/2023 Source: Cornwall Insight
Figure 2: Default Tariff Cap forecasts, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)
| Electricity | Q224 CI Forecast | Q324 CI Forecast | Q424 CI Forecast |
|---|---|---|---|
| Standing Charge (£/day) | 0.58 | 0.58 | 0.59 |
| Per Unit Costs (p/kWh) | 24.09 | 22.56 | 23.72 |
| Gas | |||
| Standing Charge (£/day) | 0.30 | 0.30 | 0.31 |
| Per Unit Costs (p/kWh) | 5.96 | 5.74 | 5.84 |
*Data from market close 19/12/2023 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.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
“As households brace themselves for energy bill rises in January, current forecasts of price cap dips later in the year may offer a small light at the end of the tunnel. The recent stabilisation of international energy markets has trickled down to April’s price cap predictions, raising hopes that this downward path will continue throughout the remainder of 2024.
“However, history has shown that the wholesale energy market is highly volatile, and unexpected global events can lead to spikes in energy prices, ultimately feeding through to household bills – as we saw this time last year. Whether concerns in the Red Sea become heightened, or another potential disruption to supply occurs, there are no guarantees the price cap will not rise again.
“The current scarcity of fixed deals lower than the cap further complicates the situation. With few affordable alternatives, households are left at the mercy of market fluctuations.
“Ongoing consultations, including over the treatment of standing charges and the costs associated with bad debt collection, contribute to the uncertainty, and we await to see how any changes will influence bills.
“Ultimately, waiting and hoping that we will avoid another global incident that sends energy prices climbing is not a sustainable strategy for government. To achieve substantial reductions below pre-crisis levels, we must focus on long-term strategies which increase domestic renewable energy sources and reduce our reliance on volatile imports.”
Reference:
Ofgem’s Typical Domestic Consumption Values (TDCVs) are now set at 2,700 kWh per annum for electricity, and 11,500 kWh 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/
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.
"Ultimately, waiting and hoping that we will avoid another global incident that sends energy prices climbing is not a sustainable strategy for government."
Dr Craig Lowrey Principle Consultant
