Annual energy bills predicted to fall £129 in July

Domestic energy prices are forecast to fall in July, the first drop in regulator Ofgem's price cap for a year.

The bill of a household using a typical amount of gas and electricity will fall by £129 a year, a drop of nearly 7%, analysts at the consultancy Cornwall Insight have predicted.

The fall would mean a typical annual bill for a dual-fuel customer paying by direct debit would cost £1,720, down from the current level of £1,849.

The price cap is based on the cost of each unit of energy, not the total bill - so if you use more, you pay more.

The energy price cap covers around 22 million households in England, Wales and Scotland and is set every three months by Ofgem.

The cap changes every three months and the regulator illustrates the effect of this with the annual bill for a household using a typical amount of gas and electricity.

This typical household is assumed to use 11,500 kWh of gas and 2,700 kWh of electricity a year with a single bill for gas and electricity, settled by direct debit.

The cap does not apply in Northern Ireland, which has its own energy market.

"The fall in the price cap is a welcome development and will bring much-needed breathing space for households after a prolonged period of high energy costs," said Dr Craig Lowrey, principal consultant at Cornwall Insight.

He added that, while it was "a step in the right direction", prices were not falling enough for those households still struggling with cost of living, and bills "remain well above the levels seen at the start of the decade".

"As such, there remains a risk that energy will remain unaffordable for many," he said.

Last month, Cornwall Insight had predicted a larger fall in the cap - to £1,683 - and it said the new forecast partly reflected higher wholesale energy prices.

It predicted the energy price cap would fall again in October, followed by another drop in January 2026.

However, it warned these forecasts could be affected by a number of factors, including changing weather patterns, US tariffs, and the continuing impact of the war in Ukraine.