Energy price cap in Great Britain expected to fall in January – but higher bills loom

British households will have a brief reprieve from rising gas and electricity costs this January, before the cost of the government’s energy policies piles another £75 a year on to bills by the spring, according to a leading forecaster. The regulator’s cap on dual-fuel bills is expected to fall by 1% from January to the equivalent of £1,733 a year for a typical household – a £22 drop – because of lower wholesale gas prices, Cornwall Insight said. However, the analysts have warned that the modest relief on energy costs will reverse by April, when the annual energy price cap is forecast to climb by £75 to pay for the build-out of Britain’s gas and electricity networks. Related: UK watchdogs need to step in on rip-off bills, which are bad for consumers and the economy | Heather Stewart Craig Lowrey, a principal consultant at Cornwall, said: “January’s price cap dip might look like good news, but it’s only part of the picture. 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.” He added: “The government pledged to lower bills on the promise that investment in renewables would reduce our reliance on global energy markets and stabilise bills, but what we’re seeing now is a shift, wholesale prices are no longer the main story. “The real pressure is coming from rising non-energy costs, with levies and policy decisions associated with that investment in renewables driving up bills.” The forecast has emerged a little over a week before the chancellor is due to present her autumn budget to parliament, with reports suggesting that Rachel Reeves may remove the 5% VAT rate levied on energy bills to help ease the cost of living crisis. Cornwall forecast that this would shave on average about £80 a year from bills. “While adjustments to subsidies or VAT may make a dent in bills, the government doesn’t have full control over many of the underlying non-wholesale costs,” Lowrey said. “The shift to renewables will bring long-term stability and energy independence, but it’s not free. The upfront costs are real, and they’re landing on bills now.” Jess Ralston, an energy analyst at the Energy and Climate Intelligence Unit thinktank, said: “An upgraded power grid will enable the UK to use more of its own renewable power, making it less reliant on foreign gas imports and less at the mercy of the kinds of foreign price swings that saw household bills soar.” Lowrey said the challenge for the government would be “balancing short-term affordability with long-term resilience, and crucially making sure people understand why that trade-off matters”. “If the government doesn’t bring the public with them on the energy transition, then it risks undermining the very policies intended to support them,” he added.