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Will Energy Prices Go Down In 2024?

The energy crisis that has gripped the UK since the Autumn of 2021 has let up slightly in recent months. Wholesale energy prices have fallen overall in 2023.

Will consumers see a decent reduction in household and business electricity prices in 2024 as a result? There seems to be no certainty that domestic and business energy prices will fall materially in 2024.

We put a spotlight on the energy price landscape and consider if the next period is a good time for consumers to fix their energy contracts or switch business electricity suppliers.

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Should I Fix My Energy Prices Until 2024?

A fixed-rate contract allows you to lock in a fixed electricity or gas unit price for a set period.

Fixed-rate tariffs are often seen as the most affordable way to pay for business electricity. But with energy and business electricity tariffs falling and the market still volatile, what is the best strategy for 2023/4?

Households and organisations face different decisions.

Households

For household energy, there is fairly wide agreement that you shouldn’t fix your energy prices now unless you can find a fixed tariff better than the existing price cap of £2,074. The price cap will be revised on 1 October 2023 and many analysts expect the cap to fall below £2,000.

In mid-2023, no energy suppliers were offering a switch to a fixed tariff lower than £2,074. More tempting offers may come to market after July.

Business electricity and gas customers

Companies that took out fixed contracts for 24 or 36 months while gas and business electricity prices were at their peak will be feeling the pain now with prices a good deal lower. You may sign a fixed tariff deal today and feel the same way if prices fall in 2024.

A higher price environment is expected to last for a while. Plus market volatility is still very much a factor. There’s a case to be made for fixing your rates until 2024 because you will be protected against volatility and possible sharp price rises over this next uncertain period.

That depends on finding a good price and a favourable 12-month or 24-month contract. Which might be hard.

A great way to access more affordable commercial gas and electricity is to compare business electricity prices and gas deals. Business Energy Comparison can perform a comprehensive business gas and business electricity comparison for you. Changing business electricity supply has been a game changer for many clients.

What Help Is Available For Energy Bills In 2024?

The Energy Bill Discount Scheme (EBDS) is a government assistance scheme available to organisations until 31 March 2024.

  • It allows eligible businesses to receive unit discounts on energy bills.
  • This discount is subject to a maximum limit and is based on wholesale prices.
  • It charges business electricity at £19.61 per megawatt-hour (MWh). There is a price threshold of £302 MWh meaning firms paying a rate of £302 or less for business electricity don’t get the discount.
  • Charges business gas at £6.97 per MWh with a price threshold of £107 MWh.
  • The discount is calculated by the difference between wholesale prices reflected on the energy contract and the price threshold (as mentioned above).
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In mid-2023, many experts are seeing prices trending lower as we approach 2024. However, the volatility of the markets over the last two years suggests there are no guarantees. Significantly lower gas and business electricity rates might still be a way off.

Some experts predict a high-price environment for most of the decade. Industry regulator Ofgem doesn’t expect prices to return to pre-crisis levels in the medium term.

Some commercial energy and business electricity suppliers who locked into expensive forward contracts in Autumn 2022 will exit these contracts in Autumn 2024 and this may bring lower energy offerings to consumers.

On the other hand, government schemes to support consumers end in 2024. The Energy Price Guarantee, which helps households, is due to end in September 2024. Business gas and electricity support through the Energy Bill Discount Scheme ends on 31 March 2024.

If the government doesn’t extend these schemes, many consumers will feel the pinch of higher household energy, gas, and business electricity bills.

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Why Are Energy Prices Still So High?

UK energy prices may be lower now than at the height of the energy crisis but they remain at high levels. There are multiple factors that account for this:

  • Increased commercial gas and business electricity demand as the economy opened after Covid.
  • Low gas reserves – the UK has very limited gas stockpiling facilities.
  • Infrastructure damage – like a fire at a National Grid site in Kent that took down a power cable between England and France that is a critical part of the UK’s electricity supply.
  • The war in Ukraine.
  • Failure in the energy market – dozens of energy suppliers have gone out of business in the last few years. When a gas or business electricity supplier goes bust, it tends to push business electricity prices up.

Is There Help For Households Struggling With Price Hikes?

To help UK households, the government introduced the Energy Price Guarantee to run from October 2022 to September 2024.

The EPG sees the government set maximum energy prices and compensate energy suppliers for making energy available at below-cost rates.

Customers on standard variable tariffs pay a maximum price determined by the lower of the EPG rate or the energy price cap.

The energy price cap is set by industry regulator Ofgem and is the maximum unit price that energy providers can charge customers for each kilowatt hour (kWh) of energy consumed based on relevant wholesale prices.

The EPG served households well from October 2022 to June 2023. Ofgem has now reduced the cap thanks to lower wholesale energy prices. The price cap for July to October 2023 is £2,074 which is lower than the EPG of £3,000, so domestic prices will fall to the cap level during this period.

The price cap of £2,074 applies from July to September 2023. Customers on standard variable tariffs with typical consumption will enjoy lower bills for this period.

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Will Energy Prices Go Down In 2024?

Since December 2022, the overall energy price trend has shown rates falling. Commercial gas and business electricity rates reflect the market and move weekly. The high wholesale prices in the last quarter of 2022 have dropped by around 50%.

However, most analysts are cautious about predicting consistently lower energy prices.

Factors that count against lower household and business electricity rates include:

  • The energy market remains volatile. In a volatile market, the risk to business gas and business electricity suppliers is greater which pushes prices up.
  • Suppliers are locked into expensive contracts for natural gas, which ultimately determines domestic and business electricity tariffs.
  • Suppliers don’t usually pass on lower rates to their customers until they see a sustained period of price stability. We haven’t experienced consistent stability since 2020.

Price Comparison With Business Energy Comparison

Business Energy Comparison has extensive expertise in the market and relationships with all the leading energy suppliers. We compare business electricity rates for all sizes of businesses from small enterprises to large corporates. We also provide guidance and advice to help you optimise your business utilities and gas and electricity usage.

If a comprehensive review shows that switching is right for you, we have a dedicated service to switch your business electricity supplier and gas provider professionally and seamlessly.

Frequently Asked Questions

Why are renewable energy prices so high?

In the UK energy system, the price of renewable energy is linked to the price of gas so if gas prices increase, renewable energy prices track upward as well.

What is an early exit fee?

Some suppliers may allow you to cancel a contract before your contract renewal window opens. For this, they charge you an early exit fee. This fee can be expensive and is fairly rare in the world of commercial energy.

Should appliances be left on standby?

Not if you want to save money on your electricity bills. Computers, printers, scanners and phone chargers are amongst some of the worst offenders for electricity usage when left on standby. If you want to reduce the power they consume, switch them off when you’re not using them.