Cornwall Insight Release Final Forecast For July Energy Price Cap

22nd May 2023

Cornwall Insight has announced its final forecast for the Q3 2023 Default Tariff Cap (price cap) following the closure of the observation window1 on 18 May. Based on our analysis, we predict the cap for a typical household2 to be £2,053 equivalent per year for the period July to September 2023 inclusive. The official cap announcement by Ofgem is scheduled for 25 May.

The predictions show a decrease of £1,227 from the April cap which was set at £3,280. Currently, consumers are not directly impacted by the price cap due to the Energy Price Guarantee (EPG), which limits a typical household's energy bill to £2,500 equivalent per year. However, starting from July, household bills will revert to the price cap.

Despite the cap falling from the sky-high prices of the past two years, the figure remains over £1,000 per year more than the price cap levels seen prior to the pandemic. We do not currently expect bills to return to pre-2020 levels before the end of the decade at the earliest. However, we hope to see the reappearance of more competitive fixed-rate energy tariffs as prices begin to stabilise, providing consumers with additional options to manage their energy costs.

Prices remain subject to wholesale energy market volatility, and our reliance on energy imports means geopolitical incidents could still have a significant impact on energy prices.

We note that several industry consultations and calls for evidence on different components of price cap modelling could impact the cap's level and structure. While these uncertainties are not expected to materially impact the July cap, they could affect the cap level from October and beyond, meaning our forecasts may change - however, we will not have clarity on these until later in the year.

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