Energy bills ‘to remain high’ despite costs to drop below guaranteee

Adam Scorer calls for 'targeted financial support' on energy bills

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However, analysts at Cornwall Insights that costs are “set to remain high” in 2023 despite this drop. According to the data firm, a significant fall in energy prices are the primary contributor to this updated estimate. As it stands, the price guarantee is at £2,500 but during his Autumn Statement, Chancellor Jeremy Hunt said it would increase to £3,000 in April 2023 for 12 months.

Between the second quarter of 2023, from April to June, the average household energy bill with typical usage is forecast to be £3,545.

In comparison, between July and September of this year, average gas and electricity costs are forecast to be around £2,800.

This will be an estimated £200 below the revised energy price guarantee this year which will come as a relief for families.

Finally, households with average energy usage are forecast to see their costs sit around £2,835 between October and December.

Introduced last year, the price guarantee was implemented to better protect customers from high energy prices.

Said high prices came following external pressures in the wholesale gas and electricity market, including the war in Ukraine.

It should be noted that overall bills are not capped under the initiative, meaning the £2,500 and £3,000 figures only refers to households with typical energy usage.

Through the policy, the Government compensates suppliers for the difference between the energy price cap and price guarantee.

As part of the energy price cap, the top amount that gas and electricity suppliers can charge customers for each kilowatt hour (kWh) of energy they use is capped.

Within the last year, this threshold and support for households has gradually increased over time due to ongoing financial pressures.

The nation’s regulator Ofgem reports that the energy price cap is set to rise to an annual level of £4,279 later this month. On top of this, another increase to the price cap is expected to take place in April 2023.

While the price guarantee has been brought in to reign in concerns, energy bills have still risen by 27 percent since October, adding more pressure to working families.

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Dr Craig Lowrey noted that this revelation regarding typical energy bills for households is good news but warned that families will still have to pay a lot in the months ahead.

He explained: “While it is positive to see a drop in the price cap forecast, household bills are set to remain high.

“With the energy price guarantee rising in April, the second half of the year will still see a typical household facing bills that are well above historic levels and facing costs that many can ill afford.

“The cap’s fall below the threshold of the EPG will, if wholesale prices continue at this level, effectively see the scheme no longer costing the Government.”

As part of its forecast, Cornwall Insights urged customers to remain “cautious” due to the Government having the responsibility of underwriting the country’s entire energy market.

The firm sounded the alarm that the energy sector will likely remain unstable throughout the majority of 2023.

Dr Lowrey added: “Even if energy prices continue at current levels – which is a big if – the costs to the government over the full period of the EPG are still contributing to Government borrowing and will ultimately fall at the feet of consumers in the form of higher taxes.

“It is clear that blanket measures of bill support are not providing adequate protection for the most vulnerable and more targeted measures including social tariffs may be something for the Government to consider.”

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