London — Britain’s domestic energy price cap is expected to fall by about 7% in July due to lower wholesale energy prices, analysts at Cornwall Insight said on Monday.
A fall would be welcome news for the government, under pressure to meet a pledge to curb household energy costs, although the analysts were last month predicting a greater drop, of 9%.
Craig Lowrey, their principal consultant, said this reflected “a combination of increases in the energy wholesale markets and updated assessments of several cost inputs including policy costs and network costs”.
Since the end of April, benchmark British wholesale gas prices have risen around 10%. But they still remain significantly lower than their peak in February as warmer weather has curbed demand, the EU parliament has backed weaker gas storage rules, and fears have grown of a global trade war.
“The fall is also a clear reminder of just how volatile the energy market remains. If prices can go down, they can bounce back up, especially with the unsettled global economic and political landscape we are experiencing,” Lowrey said
Energy regulator Ofgem sets a cap on household energy bills each quarter using a formula that reflects wholesale energy prices and also takes into account suppliers’ network costs and environmental and social levies.
Cornwall Insight forecasts Ofgem’s price cap will fall in July to 1,720 pounds a year for average use, from 1,849 pounds in April.
Ofgem is expected to publish its price level for July-September on May 23.
*Susanna Twidale – Reuters
