Average price cap forecasts fall as Ofgem revises definition of typical energy consumption

The predictions for the Default Tariff Cap in this piece are out of date please click HERE to find our most up to date forecasts.

Prior to the upcoming introduction of the July Default Tariff Cap (price cap), Cornwall Insight is unveiling its latest predictions. Starting from October 2023, the forecast stands at £1,871 per annum for a typical consumer, and from January 2024, £1,900 per annum.

The fall in average price cap predictions can be directly attributed to Ofgem’s adjustment of what it defines as the average household’s gas and electricity consumption, known as the Typical Domestic Consumption Values (TDCVs). The values are used to provide consumers with an understanding of the expected energy bill for a typical dual-fuel household.

Following a consultation process, Ofgem has revised the TDCVs, from October it will be reducing them from 2,900 kWh per annum for electricity to 2,700 kWh, and from 12,000 kWh per annum for gas to 11,500 kWh – these new numbers are now reflected in our forecast assumptions.

Ofgem reviews the TDCVs every two years, using data from the previous two years’ average household consumption. However, due to the impact of the pandemic, this review process was temporality halted.

While Ofgem’s consumption values are helpful for comparison, it is crucial to understand that a household’s energy bill is based on the energy it consumes, which could be lower or higher than the defined typical household. Forecasts for unit rates and standing charges will not be affected and individual households are not directly impacted by the revision of the TDCV.

Figure 1: Cornwall Insight’s Default Tariff Cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer)

QUARTERLYNew TDCVQ4 2023 CI ForecastQ1 2024 CI Forecast
Electricity2,700 kWh£979.31£962.05
Gas11,500 kWh£891.96£938.47
TOTAL £1,871.28£1,900.52
Source: Cornwall Insight, calculated from market close figures 26/06/2023

Figure 2: Cornwall Insight’s Default Tariff cap forecasts using old Typical Domestic Consumption Values (dual fuel, direct debit customer)

QUARTERLYOld TDCVQ4 2023 CI ForecastQ1 2024 CI Forecast
Electricity2,900 kWh£1,051.23£1,029.49
Gas12,000 kWh£927.10£974.92
TOTAL £1,978.33£2,004.40
Source: Cornwall Insight, calculated from market close figures 26/06/2023

Figure 3: Cornwall Insight’s Default Tariff Cap forecasts, Per Unit Cost and Standing Charge including VAT (dual fuel, direct debit customer)

ElectricityQ4 2023 CI ForecastQ1 2024 CI Forecast
Standing Charge (£/day)0.500.50
Per Unit Costs (p/kWh)27.5226.93
GasQ4 2023 CI ForecastQ1 2024 CI Forecast
Standing Charge (£/day)0.290.29
Per Unit Costs (p/kWh)6.566.95
Source: Cornwall Insight, calculated from market close figures 26/06/2023

Dr Craig Lowrey, Principal Consultant at Cornwall Insight:

“The fall in the average price cap predictions reflects Ofgem’s efforts to align with the evolving energy consumption patterns of typical households, as consumers respond to high prices, energy efficiency measures, weather conditions and other influences by reducing their energy usage.

“While typical household predictions may provide some insight for consumers, households are still facing the challenge of bills that are well above historic levels. This situation brings us back to the question of the cap’s purpose – as doubts about the cap’s effectiveness in protecting consumers and its impact on tariff competition become a regular part of energy discussions.

“In light of this, it becomes crucial to explore alternative measures that can better protect consumers, promote fair competition, and ensure affordable and transparent energy pricing for all. The exploration of options such as social tariffs, energy efficiency initiatives, and various other avenues should be prioritised.

“Any reductions in the price cap should not diminish the sense of urgency in implementing necessary changes. The protection of vulnerable households from high energy bills remains a pressing issue that requires immediate attention.”


Notes to Editors

For more information, please contact: Verity Sinclair at v.sinclair@cornwall-insight.com

To link to our website, please use: https://www.cornwall-insight.com

 About the Cornwall Insight Group

Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.

Want to keep up to date with Cornwall Insight’s price cap predictions? We have launched a dedicated webpage that will be regularly updated with our released predictions. This page also offers helpful answers to frequently asked questions about the price cap. Don’t miss out on this valuable resource – check out the page today: Predictions and Insights into the Default Tariff Cap