Household energy bills are set to drop by £22 in January, but the relief will be short-lived as experts warn of a sharper rise just three months later driven by rising infrastructure costs.
Energy forecaster Cornwall Insight predicts the regulator Ofgem will lower its price cap by 1% when its next update takes effect, bringing the average annual bill down to £1,733 for a typical household. The drop is linked to slightly lower wholesale energy prices.
But the respite will be temporary. The consultancy expects the price cap to climb again in April, this time by around £75 a year for an average household.
Shift in bill drivers
Craig Lowrey, principal consultant at Cornwall Insight, said: «January's price cap dip might look like good news but it's only part of the picture.» He added: «Bills are still well above pre-crisis levels and are set to climb again in April, and this time it's not higher wholesale prices driving the rise.»
The April increase will be driven largely by rising charges for operating and maintaining Britain's energy networks, specifically electricity transmission and gas distribution. This marks a fundamental shift from previous bill increases, which were primarily caused by surging wholesale energy costs.
The January decrease comes despite the expected introduction of a Nuclear Regulated Asset Base levy to fund new nuclear power stations, which will add around £10 a year to bills.
Price cap context
The price cap affects around 22 million households across England, Wales and Scotland. Ofgem sets the cap every three months, with the next announcement due at the end of November.
The cap reached a record high of £4,279 in January 2023, following Russia's invasion of Ukraine and the easing of Covid restrictions. The government introduced an energy price guarantee at the time, capping average annual bills at £2,500.
Lowrey emphasized the trade-offs facing consumers as Britain shifts to renewable energy. «The shift to renewables will bring long-term stability and energy independence, but it's not free,» he said. «The upfront costs are real, and they're landing on bills now.»
He added: «The challenge will be balancing short-term affordability with long-term resilience, and crucially making sure people understand why that trade-off matters.»
Note: This article was created with Artificial Intelligence (AI).
