Are UK energy prices going down in 2024?

Energy prices have been well-above historical averages for more than two years. But, could better news soon be on the way?

Good news came on 1 April, when the Ofgem energy price cap fell by more than 12%. It means the average household is currently paying £20 a month less than they were between January and March. Another fall in the cap is on the way in July, when energy prices will fall a further 7%.

The price cap, which dictates energy bills for around 28 million households, sets the maximum your supplier can charge you for unit rates (per kilowatt hour, or kWh) and standing charges. Your final gas and electricity bill will depend on how much energy you use, meaning your costs could be higher or lower than the figures given by Ofgem. To ensure you pay the right amount for your energy, it's worth taking a meter reading at least once a month.

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With the most recent energy price cap announcement on 24 May, energy consultancy Cornwall Insight released its forecasts for the October price cap. This estimate matters because the firm's predictions have been accurate throughout the cost of living crisis. So, what do the new set of forecasts tell us about where energy bills are heading?

Will energy prices go down in 2024?

According to the latest energy price cap predictions from Cornwall Insight, energy bills could rise significantly later in 2024.

On 24 May, it said the October to December Ofgem energy price cap could come in 12% higher than the July cap at £1,762 a year for an average household, with an average amount of energy usage. This rise would be due to an uptick in wholesale prices.

If this scenario comes to pass, it would mean households would have to pay an extra £16 a month for their gas and electricity. It would also be £6 a month more than the current April to June cap. However, it's crucial to note that Cornwall Insight's forecast is an early prediction given the next price cap assessment period only began on 17 May and has almost another three months to run.

Initially, the energy consultancy had expected October's cap to see a smaller 4% hike to £1,631, with bills going down again in January. But price rises on the wholesale markets have meant that the first price cap of 2025 is now likely to be on a par with October's, it said.

Even the July cap has come in higher than had been hoped. Ahead of the April price cap announcement, Cornwall Insight had predicted a 13% (£220 a year or £18 a month) fall in energy bills this summer. But the actual cap came in more than £100 a year higher at £1,568.

We will find out what the October to December cap is on 27 August. It will be based on a wholesale price assessment period that runs from 17 May to 17 August.

Wholesale prices push up price cap predictions

Cornwall Insight said its pricier predictions had come as a result of a rebound in wholesale gas and electricity costs. These had fallen to a 30-month low in February, but then grew before stabilising again in April due to the weather and geopolitical uncertainty, the consultancy said. It has also blamed the structure of the price cap itself.

Upon the release of the July price cap on 24 May, its principal consultant, Dr Craig Lowrey, said: "The anticipated rise in bills as we move into the winter months, emphasises the continued volatility of the market and the importance of providing protection for vulnerable households.

“It is clear the cap in its current form is not going to bring down bills to pre-crisis levels. However, while the general election is likely to put a halt to any immediate reforms to household energy bills, parties may use this opportunity to highlight how they intend to approach this challenge in the future."

Ofgem is currently consulting on the future of the energy price cap. It says the mechanism is likely to be unfit for the net zero age.

Lowrey added: “Beyond bill reform, we must address the underlying transformations needed in the energy market. Short-term fixes to bills, even significant ones, have limitations, and long-term stability will require a commitment to the net zero energy transition. Only through removing our reliance on volatile imports, can we truly get a grip on bills and deliver a sustainable, secure, and stable energy future for all.”

What is the long-term outlook for wholesale prices?

Cornwall Insight did at least deliver some potential good news for the longer-term in April. It said wholesale forecast trends presented a "ray of hope" for households.

Its most recent quarterly 'Power Curve' forecast, which tracks the wholesale market's projected prices, estimates they will be 13% lower on average over the next 12 months. It means prices could come in 27% below the firm's last set of forecasts. This improved outlook follows the mildest European winter in five years.

The energy consultancy estimates prices will remain flat over the next three years, before beginning to drop away from 2028. By then, it expects improved gas supplies to be better supported by bolstered renewable energy output.

However, it says wholesale prices are likely to remain well-above averages seen from the last decade by 2031. Once inflation is taken into account, they could still be more than 10% above the most expensive prices from the late-2010s. Cornwall Insight puts this down to a continued European reliance on gas imports.

"Tight margins for renewables developers combined with commodity prices staying comparatively high, mean substantial drops are unfortunately not currently on the cards," said the consultancy's senior modeller, Tom Edwards.

“This period of relative stability does however provide a crucial window of opportunity. As we move forward, our forecasts show continued investment in renewable energy infrastructure is paramount. By diversifying our energy mix and continuing our drive for innovation, it is clear we can unlock a future where energy affordability becomes the norm, not a fleeting moment.”

How have standing charges changed?

Currently, energy customers pay a fixed daily charge covering the costs of being connected to a supply, such as cable and substation maintenance. The amount varies depending on where in Great Britain the customer lives.

There has been anger about charges going up - in many areas, the charge has doubled over the past two years - and the inability to reduce these fixed fees. At present, they mean you pay around £334 a year (£369 for standard credit customers) before you've even used any energy - a figure that will be unchanged in July.

As part of its April price cap announcement, Ofgem said the charges would be rising as a result of “increasing network costs”. The regulator recently conducted a consultation into the future of standing charges and said it is currently reviewing more than 40,000 responses.

The outcome of this review could have a major impact on energy bills. Experts predict scrapping standing charges would see prices rise significantly.

While everyone is seeing an increase in the amount they have to pay to cover the costs of the nation's energy infrastructure, Ofgem has announced that it will be bringing standing charges for prepayment meters in line with the rest of the market.

This move means the so-called 'prepayment premium' will be ended for good, saving households with this type of meter £49 a year, while slightly increasing bills for direct debit customers. The government's Energy Price Guarantee had temporarily equalised standing charges, but was due to expire in April.

Should I fix my energy?

Since they made a comeback in July 2023, fixed energy deals have struggled to compete with the Ofgem energy price cap rate. However, experts have recommended that people consider one ahead of the anticipated October price cap hike.

Will Owen, comparison website Uswitch's energy expert, said: "Storm clouds are on the horizon with the cap predicted to rise again in October. This would mean higher rates over the winter, when we use the most energy for heating our homes.

“If you’d prefer to avoid the uncertainty of rising costs in winter, now is a good time to think about taking a fixed energy deal, which would let you lock in rates while prices are cheaper. Fixed energy tariffs are the cheapest they’ve been since summer 2021 and there are some great value deals currently worth considering.”

How to keep energy bills low

To help you keep energy bills low, we have gathered some top tips in our article looking at 13 ways to reduce your energy costs. If you're interested in the best ways to improve your energy efficiency and reduce costs, we explore: radiators vs electric heaters, heated airers vs tumble dryers, and wood burning stove vs central heating.