Energy bills unlikely to fall in the medium term, Ofgem warns

• Energy bills aren’t expected to decline over the decade
• Households will pay £1,568 per year from July
• The cost of energy is a key election campaign issue
• Ofgem heads backs more support for struggling households

Energy prices have become a key campaign issue in the upcoming general election

UK households are unlikely to see a fall in their energy bills over the next 10 years, according to Mark McAllister, chair of Ofgem.

Speaking to the Financial Times McAllister put this down to the costs of building out the electricity network to help support the shift to renewables, warning that he expects bills to be “relatively flat in the medium term”. 

He also said he backed more targeted support for households struggling with their bills. 

“As we build in more and more renewables, we’re also building in the price, amortised over many years, of the networks as well,” he explained. 

“If we look at the forecasts for wholesale prices and then build on top of that the costs of the network going forward, I think we see something in our view that is relatively flat in the medium term.” 

Earlier in May, Ofgem announced that from 1 July to 30 September, gas prices will be capped at 5.48p per kilowatt hour (kWh) and electricity at 22.36p per kWh. The cap does not apply to households in Northern Ireland, but prices are in decline. 

Households using a typical amount of energy and paying by direct debit for dual gas and electricity would pay £1,568 per year, from 1 July. This is a fall of £122 compared to the annual bill on charges between April and June. 

Users who pay their bills every three months by cash or cheque will pay more, an average of £1,668 per year. 

However, the cost of energy is a key campaign issue ahead of the 4 July election, with both the Conservative and Labour parties claiming they will try to bring bills down. 

Energy prices are down by more than 60% since January 2023, which was the peak of the energy crisis, thanks to surging wholesale costs, fuelling inflation and a cost-of-living crisis as a result of Covid-19. 

The National Grid said it would invest more than £30bn (£1bn) in electricity networks over the next five years, with chief executive John Pettigrew recording a “single-digit pound impact” on network costs on bills would be offset by the wholesale cost benefits of building renewables.