Millions of households could see relief on their energy bills this summer as the energy price cap is forecast to drop by 7% in July, according to new estimates.

The cap is due to rise by 6.9% from April 1 taking it up to the equivalent of £1,849 a year based on typical use for the 70% of households that are tied to these tariffs.

However, new research from Cornwall Insight based on recent shifts in wholesale prices suggests it will come back down by 7% from July 1, which equates to an annual reduction of £137, bringing the annual figure back down to £1,712.

Significantly, savvy consumers can make big savings compared to these price cap figures by switching to one of the cheap fixed rate deals available to those who shop around.

Despite the projected drop in the price cap, energy bills will remain significantly above historic averages continuing a squeeze on living standards, industry and the UK economy.

Looking ahead, Cornwall Insight forecasts a slight increase in the price cap in October before another decrease in January 2026. However, energy prices remain highly susceptible to global events, with geopolitical tensions continuing to cause fluctuations.

The potential ceasefire between Russia and Ukraine in mid to late February initially brought some stability, but questions surrounding the role of the US in any ceasefire brought with them fresh uncertainty.

Warmer weather and lower gas demand from Asia have recently led to falls in wholesale prices.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight, cautioned that while falling prices are welcome news, energy bills remain vulnerable to market shocks.

He said: "The latest forecast drop will bring some relief to households and the government, offering a welcome sign that energy prices are moving in the right direction.

"However, we mustn't get ahead of ourselves. While prices are falling, recent patterns show the impact that wholesale market volatility can have on bills in the space of just a few days.

"The UK's heavy reliance on energy imports - particularly gas - combined with ongoing geopolitical tensions, ensure household bills remain highly vulnerable to sudden shocks."

He also emphasised that long-term energy pricing reforms are needed: "Looking at our forecasts in a historic context, it is clear that changes to the price cap are only delivering relatively small adjustments compared to the overall cost households face.

"Furthermore, our longer-term forecasts show little prospect of returning to pre-crisis price levels. The government and Ofgem have tools at their disposal - introducing social tariffs for the most vulnerable households and a zero-standing charge cap are just two of these - but tweaks to the current system won't deliver the reductions people have been led to expect."

While energy consumers brace for price fluctuations, many could avoid the uncertainty by opting for fixed-rate energy deals, which are currently available at rates lower than the price cap.

Elise Melville, energy expert at Uswitch.com, urged consumers to consider switching: "A predicted fall in the July energy price cap might sound like good news, but the long-term outlook remains uncertain, and there's no guarantee that prices will definitely come down. If you have not switched in over a year, you are likely to be on a standard tariff and will be paying more than you need to for your energy."

She highlighted that consumers could save approximately £151 a year compared to predicted July rates by switching now to a competitive fixed-rate deal. Currently, the cheapest fixed-rate tariff, Outfox the Market's "Outfox the Price Cap (Apr 25) 12M Fix'd Dual v2.0," offers an annual bill of £1,605 for a typical dual-fuel household, locked in for 12 months.

With energy prices remaining unpredictable and the April tariff increase looming, households are advised to review their options and consider fixed-rate deals to mitigate future bill hikes.