High energy prices predicted to be 'the new normal'

Getty Images

Domestic energy prices are expected to edge up again in the New Year, according to consultancy Cornwall Insight.

A household using a typical amount of gas and electricity will pay £1,736 a year from January, according to the forecaster, which is widely regarded for its accurate predictions.

That would be a £19 a year rise, or a 1% increase, compared with the current typical annual bill of £1,717. It said high energy prices were likely to be "the new normal".

Energy regulator Ofgem will announce the next official quarterly price cap on Friday, with some charities concerned about how less well-off households and pensioners will cope during the colder months.

The energy cap limits the maximum price that can be charged for each unit of gas and electricity, rather than the total bill.

This means people in larger properties will tend to pay more overall owing to higher energy usage, and those in smaller properties tend to pay less.

The energy watchdog Ofgem's price cap affects about 27 million households in England, Wales and Scotland. Different rules apply in Northern Ireland.

Dr Craig Lowrey, principal consultant at Cornwall Insight, said that while bills will remain "largely unchanged" from October, the news that prices will not drop after rises were seen in the autumn will still be "disappointing" for many.

"What we've been looking at were prices well above the historic norms," he told the BBC's Today programme.

He added that there "doesn't seem to be any sign of a return to pre-energy crisis levels". Prices jumped in 2022 when the conflict between Russia and Ukraine broke out.

The consultancy also expects that prices will remain higher due to geopolitical tensions, bad weather and maintenance taking place on Norwegian gas infrastructure.

The market is still "very sensitive" to global events, it said, with higher prices likely to be "the new normal".

Peter Smith, director of policy at the National Energy Action charity, said that many people were already "rationing their energy use" or building up debt to try to keep warm.

"With increased wholesale prices in the last few months, there won't be any let up in the unaffordable cost of energy," he said.

Further ahead, Cornwall Insight anticipates the energy price cap will drop slightly in April 2025 and again in October 2025.

It suggested that it may still be important for the government to consider "ways to protect the vulnerable" from higher energy bills, such as social tariffs.

The new Labour government has faced criticism for its decision to withdraw the winter fuel payment for millions of pensioners.

At Chancellor Rachel Reeves' first Budget, it was confirmed that future payments would only be made to those getting pension credit or other means-tested help.

The government has said the move was necessary in order to address what it has called a financial "black hole" it inherited from the Conservatives.

But other politicians and unions have warned that older or vulnerable people with disabilities could risk their health by cutting back on heating their homes as a result.

In Scotland, a couple has been given permission to proceed with their own legal challenge against both the UK and Scottish governments over the changes to the benefit.

Read more here on five ways to cut costs this winter.