Will gas and electricity bills go down in 2024 – and will fixed rate deals return?

Energy bills are likely to fall in 2024 but will still remain historically high, with households struggling to find cheaper deals.

The new year will start with a rise in the price cap, energy regulator Ofgem has confirmed, with the average annual bill rising to £1,928 on 1 January.  

That is an increase of £94. 

We look at what households currently pay for energy, what they could pay throughout 2024, and when prices might finally start to go down.

Still rising: The typical energy bill is going up by £94 in January, Ofgem has confirmed

What is the average energy bill now?

The typical home currently pays gas and electricity bills of £1,834 a year – the level of the Ofgem price cap, which sets prices for more than 80 per cent of homes.

The price cap applies to variable-rate energy tariffs paid by direct debit. It is based on the price paid per kWh of energy, so varies depending on how much is used.

Before 2021, the price cap was normally reserved for a minority of households – normally because they had fallen off the end of their cheaper fixed-rate deal without switching to a new one.

But after energy prices began soaring in late 2021, energy companies began failing. The nervous remainder stopped offering new fixed rate tariffs, leaving most households on expensive variable rate deals.

What will happen to the energy price cap in 2024?

The average price-capped energy bill will rise from £1,834 now to £1,928 on 1 January, an increase of £94. That £1,928 cost will then last until April, when Ofgem resets its price cap.

Ofgem has made no predictions for the price cap past April 2024.

However, expert energy analysts at Cornwall Insight have, after predicting price cap movements with a high degree of accuracy since 2021.

Movements: This graph shows how Ofgem’s price cap has risen and fallen since 2019

After April, the price cap is due to fall by £268 to £1,660, according to Cornwall Insight’s forecast.

This trend is currently expected to carry on through 2024, falling to £1,590 in July before a slight increase to £1,640 from October.

Cornwall Insight principal consultant Craig Lowrey said: ‘As households brace themselves for energy bill rises in January, current forecasts of price cap dips later in the year may offer a small light at the end of the tunnel.’

When fixed rate deals return?

The real hope for cheaper energy bills comes in the form of competitive fixed-rate deals, but these are hard to find.

There are many providers offering fixed-rate deals to existing customers, many of which are cheaper than the price cap – but often only just.

Ofgem rules mean providers do not need to publish the details of these tariffs – and so none do.

To take advantage, households need to carefully compare their current unit rates and standing charges on a variable rate deal compared to those of any fixed rate being offered.

Many fixed-rate tariffs actually work out more expensive than the price cap, meaning consumers need to tread cautiously.

Far rarer are cheap fixed-rate deals open to any customer, which would allow any household to switch easily to a cheaper energy tariff.

Lowrey said: ‘The current scarcity of fixed deals lower than the cap further complicates the situation. With few affordable alternatives, households are left at the mercy of market fluctuations.’

However, if Cornwall Insight is correct that energy bills will fall next year, this could spur energy firms to bring back cheaper fixed-rate deals.

Natalie Mathie, energy expert at Uswitch.com, said: ‘If these predictions ring true, we hope that it will encourage suppliers to bring back cheaper fixed deals. Ofgem should ensure it is encouraging suppliers to offer deals widely, and at competitive prices.’

Bills, bills, bills: Cash-strapped households are hoping for a return to cheaper deals

Price cap COULD still go up 

The Ofgem price cap could also go up next year for a couple of one-off reasons.

Ofgem has said it is planning to put its price cap up by £16 in the period between April 2024 and March 2025, to cover unpaid customer debts during the energy crisis. This means the average customer would pay an extra £1.33 a month.

Ofgem has also warned that energy bills could rise by £43 a year from 2026 to compensate gas networks for the UK’s net zero drive.

The cost of delivering gas to UK homes is run by private companies and paid for through energy bills and levies, regulated by Ofgem.

But these firms face losing money on their investment, Ofgem said earlier this month, as the use of gas slows down under Government initiatives like the heat pump rollout.

If the Government does not intervene, consumers face higher gas bills, Ofgem said.

This post first appeared on Dailymail.co.uk