Energy Bills Set to Fall to Lowest Level Since July 2024 Thanks to Budget Measures
British households are poised to experience welcome relief on their energy bills starting April, thanks to measures announced in the recent government budget. According to detailed analysis from research firm Cornwall Insight, typical dual-fuel households can expect their annual energy costs to drop by approximately 7% to £1,641, down from the current price cap of £1,758. This reduction would bring energy bills to their lowest point since July 2024, providing much-needed financial breathing room for many families still recovering from the energy crisis and broader cost of living pressures. The anticipated decrease comes primarily through government policy changes rather than significant movements in wholesale energy markets, highlighting how political decisions can directly impact household finances in the energy sector.
The primary driver behind this forecasted reduction is Chancellor Rachel Reeves’ budget announcement to cut £150 from energy bills by removing certain levies previously paid through consumer bills. Specifically, the government has scrapped the Energy Company Obligation (ECO) scheme, which was designed to tackle fuel poverty and reduce carbon emissions, and has removed 75% of the renewables obligation costs from consumer energy bills. These policy costs will now be funded through general taxation instead of being directly charged to energy users. This represents a significant shift in how green energy initiatives are funded in the UK, moving the financial burden from a flat charge on all energy consumers to the broader tax base. However, consumers should note that the full benefit of these removals won’t be realized on their bills because of offsetting increases in other charges related to the operation and maintenance of energy networks.
The predicted reduction, while certainly positive news for households, isn’t quite as substantial as initially forecasted back in December, when experts had anticipated a more dramatic £138 drop. This adjustment reflects the persistent volatility in wholesale gas markets, largely driven by ongoing geopolitical tensions that continue to create uncertainty in global energy prices. The energy price cap, set quarterly by regulator Ofgem, limits what energy providers can charge per unit of power based on wholesale energy prices and policy measures. The official announcement for April’s price cap will be made next Wednesday, providing consumers with confirmation of exactly how much they can expect to save in the coming months. This regulatory mechanism continues to be a crucial tool in protecting consumers from the worst effects of market volatility while still allowing the energy system to function.
Looking forward, there’s further encouraging news for household budgeting as Cornwall Insight forecasts that energy bills are likely to remain relatively steady throughout 2026. Only a small rise is anticipated in July, though as always, significant movements in fossil fuel markets or new policy announcements could alter this outlook. This stability would represent a marked change from the dramatic price swings experienced during and following the energy crisis that began in 2021, when household bills more than doubled in a matter of months. For many households that have been struggling with high energy costs for years now, the prospect of predictable bills at lower levels offers a chance to regain financial stability and reduce the anxiety associated with seasonal bill fluctuations.
The government’s decision to shift certain green levies from bills to general taxation reflects a broader policy debate about how best to fund the transition to cleaner energy. Proponents argue that removing these costs from energy bills makes the system more progressive, as energy bills represent a higher proportion of income for lower-income households. By funding these initiatives through general taxation instead, the financial burden theoretically shifts more toward those with greater ability to pay. However, critics may question whether removing these visible charges from bills might reduce consumer awareness of the ongoing costs associated with decarbonization efforts. Regardless of these debates, in the short term, the immediate effect will be lower bills for millions of households at a time when many are still feeling financial pressure from inflation and high interest rates.
While the forecasted reduction will be welcomed by households across the UK, it’s worth noting that energy bills remain historically high compared to pre-crisis levels. Before the energy crisis began in 2021, typical dual-fuel bills were around £1,000 annually, meaning that even with this reduction, consumers are still paying significantly more for their energy than they were just a few years ago. Nevertheless, the downward trend and forecast stability represent important progress in the return to more manageable energy costs. As the UK continues its transition toward renewable energy sources, finding the right balance between funding this transition, maintaining energy security, and keeping costs affordable for consumers remains one of the most significant policy challenges facing the government. For now, though, households can look forward to at least some relief when the new price cap takes effect in April.
