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 definitely arrived on Easter Monday (1 April), when the Ofgem energy price cap tumbled by more than 12%. It means the average household will save £20 a month over the next quarter, according to the energy regulator's figures.

The cap, which currently dictates energy bills for around 29 million households, sets the maximum your supplier can charge you for unit rates (per kilowatt hour - kWh) and standing charges. Your final gas and electricity bill will depend on how much energy you use.

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So, it means your bills 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.

While energy prices went down on 1 April, other household costs rose. For example, water bills have increased and council tax has been hiked by more than the rate of inflation.

Energy consultancy Cornwall Insight released its latest set of forecasts for the price cap in late March. These estimates are based on movements in the wholesale markets, which play a major role in governing the rate of the cap. Cornwall Insight's forecasts matter because its predictions have been the most accurate throughout the cost of living crisis.

So, what do its news figures 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 may not fall by as much as had previously been expected later in 2024.

After falling 12.3% on 1 April to an average annual cost of £1,690, the cap had been expected to plummet by another 13% from 1 July (the annual figure is based on an average home with average energy use, which pays via direct debit). However, the consultancy has revised this estimate upwards.

Now, it expects bills to fall 7.7% this summer to an annual figure of £1,560 - a cut to monthly bills of £10.83. Although this figure is more expensive than the previous prediction, it would still mark a near-20% (£31 a month) fall in typical energy bills compared to the January to March 2024 cap.

Looking further ahead to the October cap, Cornwall Insight has once again upped its expectations. Instead of a 4% hike to a yearly figure of £1524, costs are now expected to go up by 4.5% (almost £6 a month) to £1,631.

Its first forecast for January 2025's cap has come in at almost the same rate as October's at £1,634. However, this is highly likely to change as time progresses. We will find out what the July to September cap is on 28 May. October's figures will be released on 27 August.

Wholesale prices push up price cap predictions

Cornwall Insight's principal consultant, Dr Craig Lowrey, said the pricier predictions had come about as a result of a "slight rise" in wholesale prices from the 30-month low recorded at the start of 2024. He added that the reduction in prepayment meter standing charges (more on this, below) has also added an extra "small cost" to direct debit bills.

He said: “While no household will want to see forecasts rising, it’s important to recognise that these do still represent a fall from the new cap coming in from April, itself a large drop. So there is every reason to remain optimistic for energy bills moving forward."

Cornwall Insight has previously estimated that energy bills will remain well above pre-Covid levels until at least the end of the decade. Costs are currently hundreds of pounds above where they were before energy bills started to rocket in 2021.

Lowrey called on the party that wins the next general election to implement measures that will bring costs down more rapidly for bill payers, such as greater investment in renewables.

He said: “The next government, regardless of its composition, will face numerous competing priorities. Yet, it must maintain a focus on securing our energy future. [It is] essential for fostering affordable and stable energy costs for both households and businesses."

It comes as Ofgem has launched a consultation into the future of the energy price cap. The government is also consulting on how consumers can be better protected from sharp practice by energy suppliers.

What is the long-term outlook for wholesale prices?

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

Its latest 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 did standing charges change in April?

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 £300 a year before you've even used any energy.

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?

Some energy providers are offering fixed energy deals that are slightly below the April price cap. However, if Cornwall Insight's forecasts for the rest of 2024 are correct, they could still work out as being pricier than future caps.

The reason why fixed tariffs are struggling to match the price cap is that no one can predict where wholesale prices will go next. Until global gas supplies become more predictable, suppliers will continue to set their rates on or around the cap rather than base them on market competition.

So, should you fix? It very much depends on your attitude to risk. Wholesale energy prices could still spike at any time, so fixing could save you money on future caps. But equally, they could drop significantly, if forward forecasts are anything to go by. Should this scenario play out, you could be paying a higher rate for your energy, and facing hefty exit fees to switch to a better deal.

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.