Ofgem’s interim director general of markets Neil Kenward predicted what energy prices would do
Bills have been climbing since the US strikes on Iran (Image: Getty)
A senior figure at Ofgem has offered a forecast regarding the future direction of our energy bills. Neil Kenward serves as the interim director general of markets for the energy regulator.
Speaking on the Making Money podcast, he was questioned about whether he envisaged a time when energy costs would fall to levels last witnessed before the Covid-19 pandemic. Energy costs surged dramatically in the UK from 2021 onwards as global economies reopened and demand rocketed following the Coronavirus crisis.
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The circumstances were worsened by Russia’s invasion of Ukraine, with numerous nations opting to cease purchasing Russian energy. Discussing the likelihood of costs returning to pre-Covid-19 and Russia–Ukraine War levels, Mr Kenward said: “There is scope to bring UK energy bills down over time, and we can see that with low carbon power potentially gets cheaper as as we might hope in time. And we can get that more efficient system with more flexibility, etc.
“So we look at what’s happened in the price cap between pre-crisis, so say 2019, and now. And basically, the price cap has gone up almost 50 per cent. Now, of course, people’s incomes So, in real terms, it hasn’t gone up by 50 per cent. It’s more like 15. And people’s incomes have also gone up quite a lot.
“Basically, energy bills are a huge affordability challenge for a lot of people. We completely see that. And we can’t solve the affordability challenge in Ofgem. We can help by the way we regulate the system. We can keep costs as low as possible.
“But ultimately, it becomes a government choice about interventions like the Warm Home Discount to help households that are struggling to pay their energy bills. So I think I’d be surprised if we can get energy bills back down to where they were.
“They have been coming close, partly with government interventions. They’ve been In real terms, they’ve been coming closer to what they were before.”
Are bills coming down?
In July, UK energy costs increased as a result of the US war with Iran. The energy price cap established by Ofgem, which governs what the majority of households pay for energy, rose by 13 per cent.
And even with hostilities presently on hold following the memorandum of understanding, many believe that prices will continue to rise when the next price cap takes effect in October.
Prior to the US and Israeli strikes on Iran, prices had been coming down. The price cap in April 2027 actually witnessed prices drop by seven per cent.
The Government also cut £150 from numerous bills through measures introduced in the Budget.
The independent Resolution Foundation had forecast that bills in 2026 would be £200 lower in real terms than in 2024, although that was before strikes in Iran began. Iran’s retaliatory strikes on various Gulf states disrupted international energy supply and ultimately drove inflation higher.