Millions to see bills rise by £500 despite cut to energy price cap
27 February 2023, 09:13 | Updated: 27 February 2023, 10:24
Energy regulator Ofgem has announced the cap on the amount households pay on electricity and gas bills will drop by £1,000 to £3,280 from 1 April.
Ofgem lowered the price cap from £4,279 per year to £3,280 effective from April 1.
The price cap sets a maximum price that energy suppliers can charge consumers for each kilowatt hour of energy they use.
Ofgem said it was lowering the cap to reflect a fall in the wholesale price of energy.
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Households are currently protected from the pervious high price cap by the Energy Price Guarantee which capped the price of energy.
But this is set to increase from £2,500 a year to £3,000 from April, meaning bills are still expected to increase by around £500.
The Energy Price Guarantee (EPG) only partially protects consumers from paying the full price cap.
The government’s £400 energy rebate scheme, paid in six instalments of £66 and £67 a month, is also coming to an end this month.
Ofgem said: "This reduction in the price cap level reflects a significant reduction in the cost of buying and providing energy for customers. If it continues, it will mean that by the summer, prices paid by consumers will drop for the first time since the global gas crisis took hold more than 18 months ago."
Ofgem CEO Jonathan Brearley said: “Although wholesale prices have fallen, the price cap has not yet fallen below the planned level of the Energy Price Guarantee. This means, that on current policy, bills will rise again in April. 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.”
“However, prices are unlikely to fall back to the level we saw before the energy crisis. 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.”
But Citizens Advice chief executive Dame Clare Moriarty said the cost to Brits could be even higher than £500.
She said: "For most people, on average, we're going to see a £900 increase in people's bills.
"Now we know that that's going to be unsustainable for very many people. We estimate that the number of people who simply won't be able to afford their energy bills will double.
"So we'll go from one in 10 people to one in five people. That is a huge number of people.
"That's why we're saying that the Government has to keep the energy price guarantee where it is at the moment - £2,500."
Dame Clare added: "We believe there are about three million people who would be paying more than 10% of their income on energy who won't be entitled to any of the targeted support that the Government's going to make available, so we are talking about literally millions of people who are going to see catastrophic impacts."
The next quarterly price cap update will be on 26 May 2023.
