The prices providers pay for energy – known as wholesale prices – have fallen to historic lows with gas prices dropping by 20% over the last year, and electricity prices down 15% over the same period.
This has led to calls for providers to slash household bills, so we've asked energy experts, including our founder Martin Lewis, what they predict will happen to prices this winter.
It also comes as National Grid has said generators can only just meet household and business demand for electricity during the depth of winter. It says the margin between expected demand and what generators can supply is at its lowest for seven years.
However, while it's by no means saying there will be a power shortage – as it describes the situation as "manageable" – one industry commentator we spoke to says these tighter margins and colder weather could push household bills up.
Here are the predictions.
Martin Lewis, MoneySavingExpert.com founder, says:
"Wholesale prices are down, and while energy firms buy ahead, it is about time they factor that in, especially with the political pressure they're under from the Government. Assuming there are no big world economic factors that change things I see most big firms announcing small price cuts on their standard tariffs of 5% to 10% in the next few months.
"Yet that still leaves them massively more expensive than the cheapest, so there is no point waiting. I also expect to see continued small cuts in the price of the cheapest tariffs available for switchers – as here firms don’t buy anywhere near as far ahead – so they better reflect the move in wholesale prices."
David Cox, London Energy Consulting's managing director, said the following when asked by Martin whether the big six firms' energy prices will come down, on Radio 5 Live's 'Lunch Money Martin' show this week:
"It's looking pretty good for consumers. The outlook for the next three to five years is benign, and the wholesale price is likely to stay low. I don't think the big six firms can avoid bringing prices down. Assuming those low prices are passed to consumers that's generally good news for consumers."
Mark Todd, energy expert at Energyhelpline.com, says:
"Wholesale costs have now been dropping for two and a half years but bills have not dropped to reflect these significant declines. Household price drops are however expected over the winter, but don't expect anything big – 5% is probably the most you will see if you stay on a standard tariff. Switching is still the best option for most customers to get a big price cut."
Ann Robinson, director of consumer policy at uSwitch.com, says:
"Given the fact that wholesale energy costs – which make up around half of our bills – are low and likely to drop further, energy prices for most are likely to remain stable this winter. Suppliers have so far been reluctant to pass on the reductions in wholesale prices to the majority of their customers on so-called standard variable tariffs."
Anna Nicols, head of risk management and research at energy consultancy firm Utilyx, says:
"Forward UK wholesale energy prices are trading at historic lows, having started on a significant downward trend in December last year. However, the extent to which this is being reflected in the end-user bill remains limited.
"Suppliers will cite several reasons for lack of change – firstly, they tend to buy wholesale energy ahead of it being used by households, meaning that purchasing decisions made last year could still be impacting end-user pricing today. Additionally, according to Ofgem, wholesale pricing accounts for only 42% of the typical dual-fuel bill – and the other 58% element of the bill remains high because of transportation costs and renewable taxes.
"On top of that, National Grid's latest Winter Outlook doesn't mean we expect black-outs or shortages of gas, but we do highlight the risks of colder weather and tightening supply margins ahead as potential for a lift in wholesale prices, which could have a direct knock-on impact in lifting household bills."
Don't wait for prices to fall, act now to cut costs
Even if wholesale prices do fall, don't wait for cuts to come to you. Instead, take action NOW.
Standard energy prices for someone on a dual fuel tariff with typical usage are around £1,095/year, but you could save hundreds each year just by switching to a market leading tariff. You should:
- Do a price comparison via our free Cheap Energy Club (which also gives up to £30 cashback if you switch via us) to see if you can save.
- If possible, pay by monthly direct debit, and give your provider regular meter readings to keep bills accurate.
- Check if you can cut your usage using our Free Insulation and Energy Mythbusting guides.