Energy price cap drops - but you could be paying £900 MORE for your gas and electricity
Changes to the Government's Energy Price Guarantee mean gas and electricity customers will be worse off from April 1.
However, it is rumoured that Chancellor Jeremy Hunt could scrap his planned new EPG rate which would mean bills would rise by £400 rather than £900.
Energy regulator Ofgem announced on Monday, February 27, the cap on the amount gas and electricity suppliers can charge will drop from £4,279 to £3,280 on April 1 following the reduction in wholesale prices.
But British households won't actually pay that amount due to the Energy Price Guarantee which sees the Government subsidise bills.
The EPG was set to £2,500 but this will rise to £3,000 in April. The Government's Energy Bills Discount Scheme, which deducted £400 off every household's energy bills during the 2022/23 winter, also comes to an end.
That means a typical family will have to find about £900 more for their energy bills over the next year.
However, it has been claimed the EPG will be frozen at £2,500 for a further three months when Mr Hunt announces his Budget on March 15. This will mean customers will only be affected by the loss of the £400 Energy Bills Discount Scheme. The Treasury has declined to comment.
Although energy prices are unlikely to ever fall back to where they were before the energy crisis, there was cause for optimism, Ofgem chief executive Jonathan Brearley said.
He said: "I know that for many households this news will be deeply concerning.
"However, today's announcement reflects the fundamental shift in the cost of wholesale energy for the first time since the gas crisis began, and while it won't make an immediate difference to consumers, it's a sign that some of the immense pressure we've seen in the energy markets over the last 18 months may be starting to ease.
"If the reduction in wholesale prices we're currently seeing continues, the signs are positive that the price cap will fall again in the summer, potentially bringing bills significantly lower.”
People struggling to pay their energy bills should contact their supplier to see what help and support they are entitled to, Ofgem said.
Mr Brearley also hinted at the possibility of a “social tariff” for the most vulnerable, saying “there is a case for examining with urgency the feasibility” of such a scheme.
The energy price cap is not necessarily the amount a family will have to pay, but it is an estimation of how much a typical household on a standard tariff spends on gas and electricity. Those using more energy than the typical household could actually pay more, and those who use less, or are on a lower tariff, will usually pay less.
NimbleFins previously explained how the reduction in wholesale energy prices will benefit the Treasury before billpayers. Because the Government is paying the difference between the EPG and Ofgem’s price cap, it will be spending less taxpayer money on the scheme.
Customers will only start saving money once wholesale prices drop so much that suppliers charge less than the EPG.
*This article has been updated since it was first published on February 27 2023 to reflect possible changes in Government policy.
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