Households are set to face an increase of £500 per year in energy costs starting from April, despite a decrease in gas prices and the arrival of warmer weather.
A respected analyst firm predicts that the price cap on energy bills, imposed by industry regulator Ofgem, will reduce by approximately £1,000 next week. Typically, a decrease in the price cap would result in lower bills for consumers. However, the end of various government support measures that have kept household bills artificially lower than the price cap’s true level means that customers will not immediately benefit from the reduction, according to Cornwall Insight.
Currently, Ofgem’s price cap stands at £4,279, having surged by several thousand pounds due to factors such as the conflict in Ukraine and the resulting increase in gas prices. Cornwall Insight predicts that Ofgem’s new cap, effective from April, will be set at £3,295.
Nevertheless, even with the decrease in the price cap, bills are still expected to rise due to the phase-out of the government’s “Energy Price Guarantee” and the discontinuation of a support scheme worth £400 per household. This is despite the fact that many households will be reducing their central heating usage as spring arrives.
Campaigners are urging the government to extend its support schemes to provide further assistance to households grappling with the high cost of living.
Dr Craig Lowrey, principal consultant at Cornwall Insight, commented, “Unfortunately, the forecast for April suggests that the price cap will still be higher than the increased level of the Energy Price Guarantee, resulting in an effective 20% increase in average annual consumer bills. Additionally, considering the end of the £400 energy rebate scheme in March, energy costs for households will rise even further. Although the prospect of lower price cap projections is positive, households that are already financially strained will not experience significant benefits until July.”
However, Dr Lowrey added that the impact of higher bills may be short-lived, as falling wholesale gas prices could pave the way for more competitive energy deals. In the past, consumers could save money by switching suppliers, but persistently high prices have made the price cap the best available option for a while.
“While prices under the cap remain significantly higher than in the past, the combination of declining wholesale prices and an increase in the Energy Price Guarantee could potentially bring back competitive tariffs, allowing consumers to regain control over their energy bills,” Dr Lowrey stated.
It’s important to note that the actual amount paid by consumers depends on their energy usage, as the price cap is based on the average household consumption measured in kilowatt hours.
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