Cornwall Insight has published a new forecast predicting a slight decrease in the January 2025 Default Tariff Cap (price cap), ahead of tomorrow’s rise to an average £1,717 a year for the final three months of 2024. Predictions show there will be a 1% fall in January to an annual £1,697 for a typical dual fuel consumer1.
Our previous forecasts from August 2024 showed a slight quarter-on-quarter rise in January 2025. However, a combination of the EU meeting its gas storage targets ahead of winter, strong global LNG supply outlooks, and improved confidence regarding gas and electricity imports ahead of winter has caused wholesale market prices to shift downward.
Prices are also forecast to decline slightly in both Q2 and Q3 of 2025. This will be good news for consumers who were expecting more hikes in the new year.
Despite the forecast fall, bills remain hundreds of pounds above historic averages. With little to suggest a return to historic average is on the horizon, some have called for reform or even the removal of the price cap, arguing that it obscures deeper issues in the energy market and reduces the drive to address them. Ofgem is currently undertaking a comprehensive review of the cap as part of its assessment of general consumer protection measures, and we await the findings.
Figure 1: Cornwall Insight’s Default Tariff Cap forecast using new Typical Domestic Consumption Values (dual fuel, direct debit customer)
Source: Cornwall Insight
Figure 2: Default Tariff Cap forecast, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)
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:
“While households will have to endure a rise in the cap from October, our current forecasts show that this is a temporary blip. January to March, typically some of the coldest months of the year, often bring with them the biggest energy bills, and - while our latest forecast is welcome news - it remains subject to the volatile wholesale gas and electricity markets.
"There remain a further six weeks or so for the wholesale market to influence our forecasts, and while the negligible quarter-on-quarter drop is welcome, it must be remembered that bills will still remain hundreds of pounds above historic levels. While there is hope that a renewed focus on building a sustainable domestic energy supply that could eventually lower bills as we reduce reliance on volatile imports, these benefits will take time to materialise. Meanwhile, many people are facing financial difficulties right now."
“It’s important the government and other stakeholders look at actions they can take to shield vulnerable consumers whether this be targeted direct support, or changes to the bill system through additions such as social tariffs. Not everybody can wait for renewables energy savings to kick in.”
Reference:
- 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.
Notes to Editors
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About the Cornwall Insight Group Cornwall Insight is a leading provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Great British, Irish and Australian 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.
"While there is hope that a renewed focus on building a sustainable domestic energy supply that could eventually lower bills as we reduce reliance on volatile imports, these benefits will take time to materialise."
Dr Craig Lowrey Principal Consultant
