The predictions for the Default Tariff Cap in this piece are out of date please click HERE to find our most up to date forecasts.
Cornwall Insight has announced its final forecast for the January – March Q1 2024 Default Tariff Cap (price cap) following the closure of the observation window1 on 15 November.
Based on our analysis, for a typical dual fuel household2 we predict the Q1 2024 price cap to be: £1,931
This is a rise of 5% from the current price cap which is set at £1,834 per year for a typical consumer.
Cornwall Insight is currently forecasting the cap will decline from the end of March 2024, although this remains subject to the ongoing volatility in the wholesale energy markets, however, it will continue to remain well above historic levels.
Wholesale market volatility caused by geopolitical concerns including disruptions to the Finnish Balticconnector, the Israel-Hamas conflict and industrial action at gas production facilities in Australia, have all contributed to the higher energy unit prices.
Relatively mild weather has seen a slight dip in gas prices in recent weeks. If this trend persists, it might filter in to bills as we move through 2024. However, given the number of variables which will weigh on the market over the next few months, sharp price falls are not expected.
From the second 2024 price cap period (April-June), Cornwall Insight is also predicting a rise in electriricty standing charges, with April seeing an increase of 8p per day. The high increase in electricity standing charges is primarily due to the ongoing reform of network charges, which has shifted more of the charges from per unit to per day, meaning that customers will incur such costs regardless of their actual consumption.
The official cap announcement by Ofgem is scheduled for 23 November.
Figure 1: Cornwall Insight’s Default Tariff Cap forecasts using new Typical Domestic Consumption Values (dual fuel, direct debit customer)
|QUARTERLY||New TDCV||Q1 2024 CI Forecast||Q2 2024 CI Forecast||Q3 2024 CI Forecast||Q4 2024 CI Forecast|
Figure 2: Default Tariff Cap forecasts, Per Unit Costs and Standing Charge (dual fuel, direct debit customer)
|Electricity||Q124 Forecast||Q224 Forecast||Q324 Forecast||Q424 Forecast|
|Standing Charge (£/day)||0.53||0.61||0.60||0.61|
|Per Unit Costs (p/kWh)||28.69||26.57||25.59||26.69|
|Gas||Q124 Forecast||Q224 Forecast||Q324 Forecast||Q424 Forecast|
|Standing Charge (£/day)||0.30||0.30||0.30||0.30|
|Per Unit Costs (p/kWh)||7.42||7.00||7.01||7.06|
Note: All figures are national average unless otherwise stated. All intermediate and final calculations are rounded to two decimal places. Totals may not add due to rounding.
Dr Craig Lowrey, Principal Consultant at Cornwall Insight said:
“An unstable wholesale energy market, coupled with the UK’s reliance on energy imports, makes it inevitable that energy bills will rise from current levels. This leaves households facing yet another winter with bills hundreds of pounds higher than pre-pandemic levels, and affordable fixed deals few and far between.
“The King’s Speech acknowledged that it is our exposure to volatile international energy markets that has led to higher and less predictable bills. While we continue to advocate for immediate targeted support for vulnerable consumers, it is evident that the only enduring solution lies in transitioning the UK away from the influence of global energy prices towards sustainable, domestically sourced energy.
“The government’s commitment to attracting record levels of investment in renewable energy sources is a promising step, and ensuring they deliver on this pledge will be paramount in shaping a more stable and affordable energy future.”
- The period of time Ofgem use to monitor the market and calculate the wholesale element of the cap.
- As of October 2023, Ofgem’s Typical Domestic Consumption Values (TDCVs), are set at 2,700 kWh per annum for electricity, and 11,500 kWh per annum for gas.
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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.