Cornwall Insight reports that Britain's energy cap will fall by 7% in July.

Analysts at Cornwall Insight predicted that Britain's energy price cap would fall by 7% this July, due to lower wholesale prices.

The government would welcome a drop in energy prices, as it is under pressure to keep its promise to reduce household costs. However, analysts predicted a larger fall, of 9%, last month.

Craig Lowrey said that this was due to "an increase in energy wholesale markets, and updated assessments of various cost inputs, including policy costs, and network costs".

Since the end April, wholesale gas prices in Britain have increased by around 10%. They are still significantly below their February peak, however, as the warmer weather has curbed gas demand. The EU parliament has also backed weaker storage regulations, and there have been growing fears of a global economic war.

The fall in energy prices is a reminder of how volatile the market is. Lowrey stated that if prices are able to drop, they will bounce back, especially in the current unsettling global economic and political climate.

The energy regulator Ofgem caps household energy bills every quarter, using a formula which reflects wholesale prices of energy and also includes network costs from suppliers and environmental and other levies.

Cornwall Insight predicts that Ofgem will lower its price cap in July, to 1,720 pounds per year for average usage. This is down from 1,849 pounds last April.

Ofgem will publish its prices for the period July-September by May 23. (Reporting By Susanna Twidale)

(source: Reuters)