Carbon dioxide levels from the energy sector
The pound has also dropped below $1.27 as data adds pressure on the Bank of England to lower interest. rates Mark Felix/AFP

Annual energy bills for a typical household are expected to fall to £1,660 between April and June next year, according to a new forecast.

Consultancy firm Cornwall Insight says bills could drop by £268 a 16 per cent decrease – in line with the official price cap set by the UK's energy regulator Ofgem.

The energy price cap limits how much suppliers can charge households for each unit of gas and electricity they use.

Ofgem said the typical dual-fuel annual household bill would go up from £1,834 to £1,928 in January, a rise of £94.

But in its latest forecast, Cornwall said it expected bills to fall as the year progressed – dropping to £1,590 by July before a slight increase to £1,640 from October.

The prediction comes after news of a much bigger-than-expected fall in the UK's annual inflation rate to 3.9 per cent in November.

The previous month, it stood at 4.6 per cent.

Despite the Bank of England's insistence that it is too early to contemplate reducing the cost of borrowing, the markets believe Threadneedle Street will deliver at least four interest rate cuts during 2024.

It currently stands at 5.25 per cent, after 14 consecutive raises since 2021.

Analysts say a potential fall in energy bill costs is the result of a significant decline in wholesale energy prices.

Ofgem said the Israel-Hamas conflict, strikes at a liquified natural gas plant in Australia and disruption at a gas pipeline in Finland had so far "failed to materially impact energy supplies".

"These factors, coupled with a relatively mild winter to date, have left European gas storage levels above expectations for the remainder of winter, helping to drive down wholesale prices," Cornwall analysts said.

Dr Craig Lowrey, the principal consultant at the group, said the dip "may offer a small light at the end of the tunnel".

"The recent stabilisation of international energy markets has trickled down to April's price cap predictions, raising hopes that this downward path will continue throughout the remainder of 2024," he said.

But the firm cautioned that the market is highly volatile and unexpected global events can lead to spikes in energy prices, affecting household bills – as happened this time last year.

Homes are particularly vulnerable to price shocks, such as when Russia invaded Ukraine, explained the principal consultant.

"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," Lowrey said.

"Ongoing consultations on potential changes to the price cap, including the standing charge and bad debt collection," he added, could also impact the overall price cap level.

"Ultimately, waiting and hoping that we will avoid another global incident that sends energy prices climbing is not a sustainable strategy for government."

This week, Rishi Sunak's government announced a staggering £6 billion will be put towards fighting the soaring energy bills and reducing energy use amid the cost-of-living crisis.

The government funding comes after the COP28 climate summit deal, which was agreed upon amongst world leaders in the United Arab Emirates.

In a bid to reach net zero goals by 2050, the financing will reduce emissions and provide families with a range of heating options.

Through efficient energy measures, including using insulation for roughly 500,000 homes, the UK would have made a significant step towards the 2050 net zero goals.