Energy Price Guarantee expected to continue at same level in April

The chancellor is expected to extend the Energy Price Guarantee at current levels for a further three months.

Typical household energy bills were scheduled to rise to £3,000 a year from April, but calls have been made for the government to retain its current level of support with the cap at £2,500.

The level of help is now expected to be maintained, but energy firms have been asked to prepare for both scenarios.

The Treasury declined to comment.

At the moment, the government is limiting the typical household bill to £2,500 a year, plus a £400 winter discount.

From 1 April the help is scheduled to be scaled back, and the £400 discount will come to an end, which could push people’s bills up despite the weather getting warmer.

Fuel poverty campaigners have said the number of households struggling to afford bills could rise from 6.7 million to 8.4 million as a result of the April rise.

However, industry sources told the BBC that some energy companies have already started amending future bills to reflect that energy help will continue at or very near to current levels beyond 1 April.

Chancellor Jeremy Hunt to date has declined to extend the support at the current rate, but experts have suggested it is increasingly likely he will change course, probably at the Budget on 15 March.

Mr Hunt said last month that the policy was “under review”.

The Treasury was understood to be concerned that an open-ended commitment would leave British public finances significantly exposed to any further unexpected rise in global gas prices.

Instead the decrease in support will kick in in the summer, when it will not be needed, because the separate energy price cap is already anticipated to be lower as a result of declining market gas prices.

However, the £400 winter payment that has led to a £66 per month reduction in monthly payments on many bills does look likely to end next month.

There have been no talks about extending this element of support.

The Resolution Foundation think tank, which aims to improve living standards for people on low to middle incomes, and consumer rights champion Martin Lewis have both called on Mr Hunt to cancel the bills rise, as have opposition parties.

Labour’s shadow chancellor Rachel Reeves said: “Families are really worried about prices soaring in April and so it’s urgent the government gives them reassurance now, and extends the windfall tax on oil and gas giants to give them support for their energy bills as Labour would.”

The Institute for Fiscal Studies (IFS), an economics research institute, has forecast that the Treasury could afford to keep support at current levels until the summer due to wholesale energy prices falling sharply, meaning the cost of the scheme had been cut.

Energy UK, which represents suppliers, urged the government earlier this week to hold the level of support at £2,500 for a typical household and to “announce that quickly” so firms could price it into bills from April.

Energy Secretary Grant Shapps previously said he is “very sympathetic” to suggestions that the planned £500 rise in bills should be stopped.

However, there is an alternative view that money would be better spent by the government by targeting support for those on the lowest incomes – as is the case for cost-of-living payments – and in the winter.

“Vulnerable groups could benefit substantially from this extra funding if it was used in a more targeted way. And should those groups take precedence over universal payments to multiple homeowners and billionaires?” said Joe Malinowski, founder of comparison site Energyscanner.

There has been a drop in wholesale gas and electricity prices in recent weeks that has raised hopes that the worst of the energy crisis could be easing.

Bills began rising as Covid lockdowns ended but the war in Ukraine saw them surge further.

Without the government’s Energy Price Guarantee to limit prices, a typical household’s gas and electricity bill would have hit £4,279 a year from January under the energy price cap set by Ofgem, the industry regulator.

Read more:
Energy Price Guarantee expected to continue at same level in April