Families could save £500 on bills as energy prices are set to drop 20%

At last! Families could save £500 on bills as energy prices are set to drop 20% this summer in relief for millions

• The drop would be the first since the energy crisis triggered by Russia’s invasion 
• Analysts predict that a typical household will pay £1,981 a year from July 

Energy bills could fall sharply this summer, saving families the equivalent of £500 a year, according to new analysis.

The drop would be the first since the energy crisis triggered by Russia’s invasion of Ukraine and reflects a dip in the wholesale cost of gas and electricity.

Analysis by investment bank Investec suggests the tariff and average annual bill is likely to come down from the current price cap figure – which works out at £2,500 a year – to less than £2,000.

That 20 per cent reduction would be a relief to millions of struggling households and businesses, while it should also feed through to a fall in the rate of inflation for goods and services across the economy. 

However, even at £2,000 the figure will remain at a high level in historic terms and around double the level seen in the summer of 2021.

Energy bills could fall sharply this summer, saving families the equivalent of £500 a year, according to new analysis

A 20 per cent reduction would be a relief to millions of struggling households and businesses. (file image)

Investec analyst Martin Young predicted that a typical household will pay £1,981 a year from July. 

He also anticipated a further drop in October to £1,966 a year.

He said: ‘This latest reduction is welcome but it does not disguise that these estimates are still considerably higher than historic levels, and challenging for many.’

He called for the Government, the energy regulator Ofgem and the energy industry to work together on the swift introduction of a social tariff that will guarantee a lower cost for heat and light to the poorest households.

The fall in wholesale prices could see energy companies begin to compete for customers again by offering new fixed-rate deals that guarantee a tariff for 12 months.

At one stage industry analysts were warning that annual energy bills could top £4,000, and under a worst-case scenario more than £6,000, due to the fall-out of Putin’s invasion of Ukraine and the associated sanctions against major energy producer Russia.

A planned rise in the energy price cap from £2,500 to £3,000 from April 1 was cancelled by Chancellor Jeremy Hunt in his Budget last week amid the falls in wholesale prices and pressure from the industry as well as consumer groups.

The Energy Price Guarantee had been due to increase from April 1 but was kept at the same level until June, saving families about £160 over three months.

A planned rise in the energy price cap from £2,500 to £3,000 from April 1 was cancelled by Chancellor Jeremy Hunt (pictured) in his Budget last week 

To justify the extension Mr Hunt said: ‘With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.’

Prime Minister Rishi Sunak said: ‘Continuing to hold down energy bills is part of our plan to help hard-working families with the cost of living and halve inflation this year.’

Jonathan Brearley, chief executive of Ofgem, said there are reasons for optimism in relation to the energy crisis.

Mr Brearley said: ‘Some of the immense pressure we’ve seen in the energy markets over the last 18 months may be starting to ease.’

Ministers are under pressure to announce plans for a social tariff to help low income households struggling with energy bills over the long term.

Campaigners including Age UK and the debt charity StepChange have joined forces with energy suppliers to call on ministers to devise a social tariff.

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