The cost of domestic energy bills is set to rise in April, with the government’s Energy Price Guarantee (EPG) limiting the annual bill for an average home to £3,000. This is a significant increase from the £2,500 cap that was in place previously, and is a cause for concern for many households already struggling with the cost of living.
However, analysts Cornwall Insight have predicted that the annual bill for an average household will drop back to £2,153 in July, which could lead to increased competition between suppliers and more opportunities for customers to switch to better deals. Investec has made similar forecasts, and the sharp drop in wholesale gas and electricity prices in recent weeks has raised hopes that the worst of the energy crisis could be receding.
The current EPG caps the price per unit of energy in England, Wales and Scotland at what is considered an appropriate level by the energy regulator Ofgem. Without the EPG, Cornwall Insight estimates that the typical annual bill would be £3,295 in April, while Investec puts it at £3,332.
The actual figure will be published next Monday by Ofgem, but for households this will be largely irrelevant due to the EPG. What is important is the cost to the government of subsidising energy bills – Cornwall Insight estimates that if the EPG were to increase to £3,000 as planned, the estimated cost would be £26.8bn, while if it were to remain at £2,500, the estimated cost would be £29.4bn.
Campaigners and consumer groups have been lobbying ministers to use any savings to further support billpayers, while Labour has called for a three-month extension to the current government guarantee. However, Chancellor Jeremy Hunt has said that households are unlikely to get extra support with energy bills from April.
The rise in energy bills is a cause for concern for many households already struggling with the cost of living. Extra cost-of-living payments are primarily helping the more vulnerable with these higher costs, but with predictions of subsequent falls in bills later in the year, customers may have the chance to take back some control over their energy bills by switching suppliers for a better fixed-price deal.