Being a little over half way into the calculation period for the upcoming January 2025 Price Cap, we thought we’d update where we see things going – based on current market conditions.
Since the split of Price Caps into quarterly announcements following the ‘energy crisis’ a couple of years ago, we typically see the non-commodity elements change in the April and October caps (in line with industry timings) and no changes to these elements in the January and July cap announcements.
Therefore for January we expect a level value to remain for these elements to the October cap, leaving just the impact of the wholesale markets to be reflected in the upcoming cap.
Whilst the early part of the calculation period for the upcoming cap was looking promising with the potential for a downward movement in cap level, the most recent weeks have unwound that.
Escalations around the Middle East have injected further concerns into global energy markets of late and this has been reflected in an upward movement in energy wholesale costs.
Our current estimates show that wholesale energy prices are up by around 1.5% for the January cap compared to the one calculated during the summer for the October cap. This will likely mean around 0.6% increase in the current cap level for January, to around £1,722 – as the wholesale element alone makes up a little over 40% of the overall price cap value. This forecast will continue to change over the coming weeks.
Whilst it is important to remember this is an estimate at this time, it does give a reflection of the likely outcome we should expect to see announced at the end of November. Between now and then, the market will slowly firm up the values as the average value of the wholesale costs over a three month period become known.
For now though, the wholesale markets appear to have found a ‘new normal’ level and prices around these values should be expected for the foreseeable future.
The price cap ‘headline rate’ is provided as an indicative value of what a ‘typical’ domestic property using dual fuel and paying by direct debit will pay over the course of twelve months. It is important to consider a households individual circumstances as to location, fuel usage and payment method to ascertain actual likely costs.