Yahoo Finance Energy bills forecast to fall further as gas prices tumble
Energy bill forecasts have been cut for the second time in two weeks in a boost to households and the government.
The price cap is forecast to fall to £2,478 per year in July, Investec said, which is more than £150 below an estimate made on January 4.
The cut comes as gas prices continue to tumble thanks to warmer than usual winter weather.
Investec now expects the price cap on energy bills to fall to £3,317 in April, then £2,478 in July and £2,546 in October. That compares to previous forecasts of £3,458, £2,640 and £2,704.
It indicates that the price cap will fall below the £3,000 level from April of the government's £3,000 energy price guarantee - cutting the government's bill for state support.
However, bills are still set to be far higher than historic norms. In October 2021, the price cap was £1,277.
Prices have surged due to strains on gas supplies amid Russia's war on Ukraine.
The owner of British gas on Thursday predicted an eightfold rise in annual profits as a result of soaring energy prices.
It expects to report an adjusted earnings per share of 30p for 2022 when it publishes results next month, up from 4.1p per share in 2021.
That is even higher than what analysts had been predicting, with Investec forecasting a figure of 25.4p per share and profits of £2.4bn.
In a trading update, Centrica also said it expects to have finished the year with more than £1bn in cash.
The huge boost to Centrica’s profits is likely to prove controversial, with the Government having already levied two windfall taxes on the energy industry following a political outcry over “profiteering” from the Ukraine war.
However, RBC Capital Markets predicted that Centrica will end up paying a “staggering” £4.3bn in windfall taxes to the Exchequer up to 2028.
The price cap on household energy bills determines how much suppliers are allowed to charge consumers.
It is a cap on the unit price of gas and electricity rather than the total bill. Figures for annual bills are estimates for average households.
The cap is currently reset every three months. In October 2022, it surged to £3,549 following months of high prices, up from £1,977 previously.
Instead of allowing households to bear the full increase, the Government stepped in to keep household bills at an average £2,500 a year, paying suppliers the difference between that level and the price cap.
The £2,500 guarantee was originally set to last for two years, but Jeremy Hunt, the chancellor, decided to raise it to £3,000 from April to ease the pressure on state finances.
Martin Young, analyst at Investec, now estimates the guarantee will cost £2.3bn during 2023-24, down from £3bn previously.
The exact price level of the price caps across 2023 will depend on gas prices in coming months, however.
Competition for gas is likely to rise again as countries start to refill storage stocks for next winter, meaning prices could yet rise again.
