Consumers will see their energy bills rise in April when Government support introduced to help ease the burden is withdrawn, reports i news.
What about customers on prepayment meters?
The energy price cap will tumble to £3,280 per year in April, down £999 on the current figure, off the back of falling wholesale gas prices, Ofgem has announced.
The new cap, covering the period from April to the end of June, marks a hefty drop from the January to March figure of £4,279 per year for an average dual fuel household paying by direct debit based on typical consumption.
However, despite this decrease, consumers are actually likely to see their bills rise in April as a result of Government support introduced to help ease the burden of sky-high energy costs being withdrawn. Analysts estimate consumers will be hit to the tune of £500 a year.
For customers with prepayment meters (PPMs), the cap will fall £1,034, from £4,358 to £3,325 for average dual fuel consumption. Ofgem said the higher price for PPM customers “reflects the higher cost for energy companies to serve them”.
Why will bills go up if the cap is coming down?
The new cap will come into force just as Government assistance for households in the form of the Energy Price Guarantee (EPG) becomes less generous.
The EPG initiative was brought in last autumn as a temporary replacement to the price cap in order to protect consumers from sharp price increases after Ofgem announced a planned 80 per cent hike to the capped figure, meaning the average household would see their annual bills soar to £3,549.
Under the EPG, suppliers have been further restricted in what they can charge households per unit of energy, with the Government making up the difference. This has kept annual bills for typical households in Britain at around £2,500, but the figure is set to rise to £3,000, leaving millions of homes at risk of falling into fuel poverty.
Additionally, the Energy Bills Support Scheme (EPSS), under which every British household with a domestic electricity connection was given a £400 discount on their energy bills, amounting to £66 or £67 per month, is coming to an end.
The final discount will be applied in March, after which, the Chancellor, Jeremy Hunt, has said a review into how much help different households should receive will take place.
Analysts at investment firm Cornwall Insight calculated households would see their annual bills rise by approximately £500 as a result of Government support being wound up.
Will the cap continue to fall?
Ofgem CEO, Jonathan Brearley, acknowledged the rise will be “deeply concerning” for many households but suggested the lower cap represented a departure from the chaotically spiralling prices witnessed over the past year.
“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,” Mr Brearley said.
“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.”
When will bills to go back to what they were?
Although bills will become less out of control, prices “are unlikely to fall back to the level we saw before the energy crisis”, Mr Brearley warned.
He indicated the Government therefore ought to consider the introduction of a social tariff for the most vulnerable households.
What is a social tariff?
A lower price for those most in need. This kind of discounted tariff is already available for mobile and broadband customers in receipt of universal credit and other benefits.
People on social tariffs receive the same services as those on regular tariffs, but at a cheaper price.
Mr Brearley said: “Even with the extensive package of Government support that is currently in place, this is a very tough time for many households across Britain.”
“Where people are struggling, we urge them to contact their supplier to make sure they are getting all the help and support they are entitled to. We also think that, with bills continuing to be so high, there is a case for examining with urgency the feasibility of a social tariff for customers in the most vulnerable situations.”
How have campaigners reacted?
Consumer group Which? argued the Government should delay increasing the EPG from £2,500 to £3,000 and pointed out that PPM customers would be hit worst by bill increases as they are not able to spread the cost like direct debit customers can.
“The price cap is coming down, but not by enough to help people who will face a sharp spike in their energy bills in April,” said Rocio Concha, policy and advocacy director at Which?.
“This increase will be especially difficult for pre-payment meter customers – who are more likely to be on lower incomes – as they can’t spread these increased costs out evenly over the coming year.
“In the absence of an effective means to target support, the best thing the Government can do to support people is to postpone increasing the energy price guarantee to £3,000. For some families, who continue to be battered by high inflation, this will offer an important lifeline to stop them from falling into financial distress.”
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Source: i news
