Domestic energy prices are forecast to fall in July, reversing three consecutive increases in regulator Ofgem’s price cap.

The annual bill of a household using a typical amount of gas and electricity will fall by £166 a year, analysts at the consultancy Cornwall Insight have predicted.

That would mean a typical annual bill for a dual-fuel customer paying by direct debit would cost £1,683.

The price cap is based on the cost of each unit of energy, not the total bill – so if you use more, you pay more.

The energy price cap covers around 22 million households in England, Wales and Scotland and is set every three months by Ofgem.

While the quarterly change can skew annual comparisons, the regulator illustrates the effect of the price cap with the annual bill for a household using a typical amount of gas and electricity.

In the three months from July last year, that typical bill stood at £1,568 a year. It rose on each of the three occasions the cap was set after that.

The predicted fall of almost 9% in July – if it happens – would bring it sharply down to the lowest level since last September.

Cornwall Insight also expects a slight fall in prices in October and another drop in January 2026.

However, analysts said great uncertainty still surrounded these forecasts.

“While a fall in bills will always be welcomed by households, we mustn’t get ahead of ourselves. We have all seen markets go up as fast as they go down, and the very fact the market dropped so quickly shows how vulnerable it is to geopolitical and market shifts,” said Craig Lowrey, principal consultant at Cornwall Insight, which is widely recognised for the accuracy of its predictions.

“There is unfortunately no guarantee that any fall in prices will be sustained.

“The only real way to protect households from this constant cycle of instability and insecurity is to reduce our dependence on international wholesale markets.”

The fall in the wholesale cost of energy, paid by suppliers, is behind the latest predictions.

That has been affected by US tariffs policy and warmer-than-expected weather in Europe.