Great Britain’s household energy price cap is set to fall by 8% in April to its lowest since September 2024, a leading forecaster has said.
The cap is expected to fall by the equivalent of cutting £138 off a typical annual dual-fuel bill, after the autumn budget shifted some charges to general taxation, according to Cornwall Insight, a consultancy that tracks the energy market.
That would take the cost of the average household’s gas and electricity use for a year down to £1,620, after the energy regulator, Ofgem, announced a 0.2% increase to £1,758 from 1 January.
While the forecast cuts would bring the price cap to its lowest level since September 2024, taxpayers would bear some of the expense of energy generation in other ways.
Cutting household energy costs has been a central aim of the Labour government, which has said it aims to take £300 off domestic bills by 2030. Ministers hope to cut prices partly through a large increase in clean power generation, but also by shifting so-called policy costs into general taxation, to help provide an incentive to use cleaner electricity over gas.
In November’s budget, the chancellor, Rachel Reeves, said household energy bills in Great Britain would fall by £154 on average from April as a result of two changes.
The first was ending the energy company obligation scheme, through which suppliers funded household energy-saving measures. The second was a 75% decrease in the amount households contributed to the renewables obligation scheme, which subsidises clean power generation.
However, households will also face higher bills to pay for £28bn in upgrades to the UK’s gas and electricity grids. These are expected to add £108 a year to bills by 2031.
Ministers are planning to announce incentives for low carbon technology in homes in the new year as part of the reshaped £13bn warm homes plan. Officials say the plan will focus on getting clean technology such as plug-in solar panels into people’s houses, rather than paying for home insulation schemes.
They also hope to do more to bring down the cost of electricity versus gas, in an effort to encourage more people to switch to using heat pumps to keep their homes warm – although ministers are understood to have ruled out a levy on gas boilers.
The government has also announced it will introduce a framework for how levies should be applied in the future, with industry sources lobbying heavily for a shift away from piling costs on bills, moving them on to general taxation instead.
Jack Richardson, the head of policy at Octopus Energy, said: “The autumn budget delivered the biggest push in 20 years to cut regressive energy taxes that hold back net zero. These cuts will help the fuel poorest most. But there is still more to do, starting with the new levy control framework committed to in the budget.”
Craig Lowrey, Cornwall Insight’s principal consultant, said the budget measures to reduce bills were “a step towards the government’s £300 reduction target by 2030, and will ease some pressure on both families and policymakers”. But, he added, the government still had a politically tricky course ahead.
“We need to be clear – costs aren’t vanishing, they’re shifting. Moving the renewables obligation from bills to taxation may feel like a win, but ultimately, it’s still going to be paid by the public,” he said.
“The transition to net zero isn’t cheap, but it’s the only route to genuinely lower bills in the long term.”
The price cap, which is updated quarterly, is also affected by wholesale gas prices and other policies. Cornwall Insight said that households would benefit from slightly lower prices after US gas producers increased supplies in recent weeks, and gas usage in Europe was lower than expected thanks to a milder winter.
The price cap remains well above where it was before 2022, when Russia’s full-scale of Ukraine prompted a global energy crisis. Optimism that some form of peace deal may be approaching may also have helped to temper wholesale gas prices, Cornwall said.
Changes to grid cost forecasts also helped to lower the cap. The price cap does not apply to Northern Ireland.