Energy prices predicted to drop in 2023, giving a £500 boost for households

Forecasters are predicting a dip in energy bills this year thanks to plummeting natural gas prices. The drop could mean a saving of £500 on previous forecasts as UK gas prices fall to pre-war levels for the first time.

In addition, Money Saving Expert Martin Lewis has described how the Energy Price Guarantee interacts with the price cap to also give savings this year, although we may see them increase first.

Saving £500

Analysts at Investec are predicting the maximum annual tariff for gas and electricity could fall as low as £2,600 in July and this would represent a £500 saving on previous forecasts.

At the moment, the Government’s Energy Price Guarantee is capping bills at £2,500 but it was announced in the Autumn Statement that this will go up to £3,000 from April. The rising bills were due largely to Russia’s war in Ukraine sending wholesale gas and electricity prices rocketing.

However, since then UK gas prices have plunged to pre-war levels for the first time with natural gas futures falling below 170p per therm, down from over 500p in the aftermath of Putin’s invasion and a high of above 650p. Despite this fall, it will take a little while for the savings to filter down as Professor Paul de Leeuw, an expert from the Energy Transition Institute at Robert Gordon University, explains, as per The Daily Express:

Typically utility companies buy gas and electricity for their customers months in advance and will lock in the price to reduce the risk.

Typical usage

Martin Lewis echoes this sentiment and also described the situation recently in terms of how it affects households depending on the typical usage of £2,500 per year, even though this will be different for everyone, as per Yorkshire Live:

In April, the prediction for the price cap, which is based on the prices for the middle of November to the middle of February, is currently £3,545. So it is very unlikely that anything will change that drops it below the £3,000 energy price subsidy level we currently have.

But from July to September, the current prediction of the price cap then - and it's a bit of a crystal ball and could move - is £2,800.

So if that were to be true, from July the rates that we pay for energy would drop BELOW the Energy Price Guarantee (EPG), there would be no government subsidy, and we would pay slightly less, a little under 10% less, than the April rate.

He added that people should not be too angry about whole rate graphs for just the day ahead but rather look at predictions for the whole year as this is more relevant for UK pricing.

Sources used:

- The Daily Express 'Millions of Britons poised for huge win as households could get £500 energy bill boost'

- Yorkshire Live 'Martin Lewis gives exact 2023 date UK energy prices will go DOWN after wholesale price 'anger''