Cornwall Insight predicts Ofgem will reduce its energy price cap by £117 to £1,641 a year (Image: Getty)
Energy bills are set to fall by 7% when the price cap is next updated in April thanks to measures announced in the Budget, experts said. Cornwall Insight predicts Ofgem will reduce its energy price cap by £117 to £1,641 a year for a typical dual fuel household from April 1.
The drop is slightly lower than its previous prediction for an 8%, or £138, reduction. Ofgem is due to announce its next price cap level by February 25 for the three months from April 1 to June 30. Chancellor Rachel Reeves said last November that £150 would be cut from the average household energy bill from April by scrapping the Energy Company Obligation (Eco) scheme introduced by the last government.
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Cornwall Insight said the changes would reduce the cap by about £145 a year once VAT and pricing allowances within the cap methodology are accounted for.
It added increases in charges associated with the operation and maintenance of Britain’s energy networks have offset part of these savings.
Cornwall Insight said wholesale prices have risen slightly since its last forecast in December, with the cost of gas particularly volatile due to « geopolitical factors ».
However they said wholesale costs are still lower than when Ofgem set the January cap level and they expect the cap to remain « relatively steady » throughout 2026, « with only a small rise forecast in July ».
Craig Lowrey, Principal Consultant at Cornwall Insight, said: « Any reduction in bills is positive, easing pressure at a time when affordability really matters.
« It’s the drop in policy costs, as a result of Government interventions, that is doing most of the heavy lifting and, while wholesale costs have come back into the headlines in recent weeks, the impact on April’s bills is minimal. »
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He stressed it « won’t be easy » to keep bills down due to the investment needed to boost the UK’s energy networks and infrastructure on top of reducing reliance on imported gas. Mr Lowrey said: « The real test will be keeping those savings going. »
The consultant added: « Investment is needed if we want an energy system that is more secure and resilient, after the consequences of exposure to global energy markets were made all too apparent in recent years.
« However, there needs to be an open conversation about the fact that such a transition will not be cost free. »
Richard Neudegg, Director of Regulation at Uswitch.com, said the 7% reduction could offer some long-awaited breathing room for households still on default tariffs.
He added: « It’s important to remember this upcoming reduction is based on personal energy usage — households that use less energy will see a smaller saving, while higher-usage households will see a larger one.
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« Every single household can expect to see an adjustment in their bills from April, regardless of which supplier they’re with or tariff they’re on.
« But the real winners are households who are on or get themselves on to a cheap fixed tariff before April as they’ll benefit the most from lower rates on their heating right now and a further fall in price from April. »
The expert said two thirds of households are still paying over the odds on standard tariffs and by opting for a fixed deal they could cut their heating bills right now and still see the benefit from the Government’s intervention in April.
Mr Neudegg added: « While the price cap is forecast to fall by 7%, those who are on, or get themselves on to, a cheap fixed tariff could see their bills up to 18% cheaper than today’s standard rates once the reduction kicks in. »
A Department for Energy Security and Net Zero spokesperson said: « This Government is delivering on our promise to take an average of £150 of costs off bills from April 1. Ofgem will set out the final price cap figure in the usual way next week. »
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