Spring Budget 2023: April energy bill rise to £3,000 shelved
The Energy Price Guarantee (EPG) will be frozen at its current level of £2,500 until June, saving households from paying average bills of £3,000, the Government has confirmed.
The three-month extension of the Energy Price Guarantee comes as no surprise, as reports earlier this month suggested suppliers were preparing for the support to remain beyond April. Other leaks also indicated that wholesale prices are expected to have significantly fallen so that the EPG would no longer be needed.
But today’s announcement from the Government confirmed the reports, stating that by keeping the EPG at £2,500, typical households would save £160 on their bills.
The Treasury said energy prices are 50% lower than levels forecast in October, but added that they still remain high and so the extension to June “bridges the gap” between now and then when the prices are expected to feed through to bills.
It added that typical energy bills have been cut by over £1,300 since October, with the guarantee protecting households from paying the £4,279 a year level set out under the existing Ofgem energy price cap.
Further, by extending the guarantee, it means “households won’t feel the full force of Ofgem’s price cap between April and June which stands at £3,280 – helping to bridge consumers into the summer”.
Come July, lower wholesale gas prices are expected to feed through to lower household energy bills, with the experts at energy consultancy Cornwall Insight suggesting the cap will reach an estimated £2,100 a year for a typical household.
Bills will still rise but Government help comes under budget
However, while households will be spared the full force of April hikes, bills will still rise, with households having to find an extra £67 a month after the Energy Bills Support Scheme ends in March.
Laura Suter, head of personal finance at AJ Bell, said it was a “no-brainer” for Hunt to extend the guarantee” as the previous plan to make it less generous at the same time as stopping the monthly rebate “would have landed the average household with an extra £900 on their annual fuel bills in one swipe”.
Suter added: “Falling wholesale energy prices have played into the Government’s hands, as it expected to spend £12bn on the Energy Price Guarantee but the final bill came in at £4bn. Even by extending the measure at £2,500 the Government will still come in under budget, with the move costing an additional £3bn. The Government gets a double boost from the move, with households having lower bills and those lower energy costs helping to squash inflation – which is crucial if they are to meet their self-imposed target of halving inflation before the end of the year.”
For Sarah Olney, Liberal Democrat Treasury spokesperson, the extension does not go far enough, with the Government clearly having the budget to do more.
Olney said: “Instead of a sticking plaster for another three months, we need meaningful action now.
“The Liberal Democrats are calling on the Chancellor to cut energy bills by £500 per household. This would make a significant difference to households and the Government can afford to do it, they are choosing not to.
“In three months’ time, families will once again be facing a cliff edge of unaffordable heating bills.”
‘Helping hardworking families’
Prime Minister Rishi Sunak, said: “Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year.”
Energy Secretary Grant Shapps, said: “Putin’s illegal war has cost British families, which is why we’ve stepped in to pay around half of the typical household energy bill.
“With wholesale prices falling families will start to benefit, but in the meantime we’re stepping back in with the Energy Price Guarantee to prevent the typical electricity and gas bill exceeding £2,500. It’s just part of our plan to help families this winter.”