The typical energy bill will fall by £116 in July, according to the latest Cornwall Insight forecasts

• Ofgem’s price cap is set to fall by 7% in July, expert analysts believe
• A typical home will still face high energy bills despite the welcome drop

The average household energy bill will fall by £116 in July – but will top out at £1,500 a year.

The typical home currently pays gas and electricity bills of £1,690 a year – the Ofgem price cap level.

The price cap limits the bills paid by more than 80 percent of the country’s households that are on variable rate energy bills, paying by direct debit.

The price cap is now expected to drop by £116 – or 7% – to £1,574 a year from July 1 for average use, according to analysts at Cornwall Insight.

This is slightly higher than the £1,560 mark that Cornwall Insight had originally predicted.

However, it still marks a slow overall trajectory of falling energy bills. The average price capped bill was £2,074 a year last July.

Energy regulator Ofgem is responsible for setting the price cap, which limits daily rates as well as unit rates for gas and electricity used in variable rate transactions.

Ofgem does not speculate on the future of its price cap, but Cornwall Insight’s predictions have historically been quite accurate.

Cornwall Insight believes the cap price will rise to £1,636.44 in October and rise slightly again to £1,634.20 in January 2025.

Craig Lowrey, principal consultant at Cornwall Insight, said: “Our projections suggest that from July the average annual bill will fall by around £500 compared to last summer, providing further relief given the quarterly drop seen in April.

“Of course, we have to recognize that lower prices do not erase all problems.

“The very fact that we are still seeing bill levels that are hundreds of pounds above pre-crisis levels underlines the ongoing challenges that households face.”

Ofgem changes the price cap four times a year.

Richard Neudegg, director of regulation at Uswitch, said: “An estimated 7% fall in energy prices in July is clearly good news, with the price cap likely to hit its lowest level in two years.”

What is Ofgem’s price cap?

The price cap was introduced in January 2019 to prevent energy firms from overcharging customers with variable tariffs.

Most households had fixed-rate energy deals at the time and only switched to variable-rate tariffs if they didn’t renew at the end of the term.

Why is the price cap so important now?

After energy bills started to rise at the end of 2021, gas and electricity companies responded by withdrawing all new fixed-rate offers from the market.

They did this to try to avoid the widespread collapse that affected many energy firms, which were suddenly forced to sell energy for far less than it cost them to buy it.

As cheap fixed-rate deals had all but disappeared, almost all homes ended up on variable tariffs governed by Ofgem’s price cap.