Ofgem price cap
confirms cost of government energy support is set to fall by 90
per cent to just £1.4bn - Resolution Foundation
The Ofgem announcement today (Monday) that the energy price cap
will fall to £3,280 in April, down from £4,279 over the past
three months, confirms that the cost of universal energy support
– delivered through the Energy Price Guarantee (EPG) – is likely
to fall by 90 per cent next year to £1.4 billion, says the
Resolution Foundation.
The level of the price cap will not affect consumers as it is
above the level of the EPG, which is due to rise to £3,000 in
April. Based on current market pricing, the price cap is set to
fall below the level of the EPG from July onwards as big falls in
wholesale gas prices since last summer finally feed through into
lower household bills.
As a result, the cost of the EPG in 2023-24 – which will only
likely apply between April and June this year – is set to be just
£1.4 billion, 90 per cent lower than the £12.8 billion forecast
made at the Autumn Statement.
But while the cost of energy support is falling, energy bills for
households are set to rise sharply this spring.
The Foundation notes that the scaling back of the EPG and removal
of £400 universal bills support in April will cause energy bills
to jump by 20 per cent for households on pre-payment meters
(PPMs). Despite warmer weather anticipated from April, those on
PPMs are set to see their monthly bills in April rise from £202
to £247.
In order to avoid an unwanted spike in energy bills, and reduce
the risk of a recession in the near term, the Chancellor should
delay the scaling back of the EPG until July, says the
Foundation. This policy, costing around £3 billion, would have
the additional benefit of reducing inflation by a further one
percentage point from April.
Emily Fry, Economist at the Resolution Foundation,
said:
“The latest Ofgem price cap is a stark reminder of the lag
between falling wholesale gas prices, and falling household
energy bills.
“While consumers won’t have to face typical bills of £3,280 this
Spring, many are still set to see bills rise by a fifth as
government support is scaled back.
“The Chancellor should prevent this coming energy bills spike by
maintaining the level of the EPG at £2,500 for a further three
months.”
Unite: Ofgem and
government failing to protect communities over energy
costs
Responding to today’s announcement by the
regulator Ofgem over changes to the energy price cap, Unite
general secretary Sharon Graham said:
“Ofgem’s latest manoeuvres on the energy price cap do next to
nothing to ease the pressure on workers and communities already
haunted by the arrival of their fuel bills. This out of touch
government is clearly preparing to pull the plug on protecting
consumers and is totally abdicating any responsibility for
dealing with the runaway profiteering of energy
companies.
“A matter of days ago Centrica/British Gas announced its 2022
profits had trebled to more than £3 billion. This year, it’s
planning a £500 million share buy back for a bonanza pay out for
its shareholders. The British economy is broken for workers -
different choices need to be made.”
Ofgem price cap shows
government can cut bills in April - Lib Dems
Responding to this morning's Ofgem announcement that the energy
price cap has been reduced to £3,280 for the average household,
Liberal Democrat Leader MP said:
"This confirms the government could easily afford to reduce
energy bills in April instead of increasing them.
"People are already struggling to afford their rents and
mortgages, food shopping and bills.
"It is unforgivable that the Conservatives are choosing to push
desperate families over the edge by hiking their energy bills by
another £500.
"Ministers must listen to our calls for an energy rescue package
to save families and businesses from this cost of living
cliff-edge, funded through a proper windfall tax.
Greenpeace reaction to
Ofgem price cap
Commenting on Ofgem’s new price cap announcement,
Greenpeace UK’s climate campaigner, Georgia Whitaker,
said:
“Millions of cash-strapped households are facing a very steep
cliff edge after being dealt a devastating double blow of yet
another bill price hike just as financial support is stripped
away. But it is the government’s abject failure to deliver a
proper plan, programme or funding to insulate homes and
decarbonise heating that will push them all over the edge.
“Ministers seem to have abandoned all plans to tackle fuel
poverty along with the millions plunged into it. But the
solutions to the cost-of-living and energy crisis are the same as
those needed to tackle the climate crisis. Struggling households
will be left in freefall unless the government delivers a
properly funded green homes scheme that reduces energy usage and
keeps bills down for good.”
