Household energy costs in Great Britain are expected to fall by an average of £117 a year from April, after Rachel Reeves announced in the November Budget that the cost of green subsidies would be removed from domestic bills.
According to Cornwall Insight, a leading energy consultancy, the government’s quarterly cap on energy bills is expected to fall after the chancellor’s decision to convert levies used to support renewable energy projects into general taxes and scrap the billpayer-funded Energy Efficiency Scheme.
Analysts expect the typical dual-fuel home price cap to drop to an average of £1,641 a year from April, even if energy market prices are slightly higher.
The impact of Reeves’ energy cost intervention is estimated to shave £145 a year off the average annual energy bill, but the rising cost of maintaining and upgrading energy networks will partially offset these savings.
Craig Lowrey, principal consultant at Cornwall, said: “The real test will be to sustain those savings. This will not be easy as the UK continues to upgrade its networks and infrastructure. That investment is essential if we want a more secure and resilient energy system. Such a transition will not be cost-free.”
Although energy bills will fall as expected, they will be around a third higher – by around £425 a year – than they were before Russia’s invasion of Ukraine triggered the energy market crisis across Europe. Gas market prices are higher due to the cost of importing more gas by tanker from the US and the Middle East, but also reflect the higher costs of the UK’s energy transition.
The impact of wholesale gas market costs on price caps is £170 a year higher than four years ago, while the cost of Britain’s energy networks has risen by £143 a year.
“The most important thing is transparency — being honest with people about why these changes are happening and how they fit into the long-term plan,” Lowrey said. “Bills aren’t going to drop by two or three hundred pounds overnight, but long-term progress is possible if we commit to the transition. Ultimately, moving to indigenous energy offers a stronger chance of ultimately achieving price stability by providing greater energy security in the process.”
