Households face £500 jump in energy bills under Ofgem price cap
The average household energy bill is set to rise by £500 per year from April despite a stark fall in gas prices.
Ofgem, the energy regulator, on Monday confirmed the energy price cap would fall to £3,280 from April, a drop of £999 thanks to falling gas prices.
However, bills are set to climb from £2,500 per year to £3,000 per year as the Government lowers the amount of support it is offering households.
Campaigners are calling on the government not to lessen their support to households, given the fact falling wholesale prices lessens the cost of doing so.
Dame Clare Moriarty, chief executive of Citizens Advice, said it estimates the number of people unable to afford their bills “will double, from one in 10 to one in five,” unless the government changes course.”
The Government stepped in last October to subsidise household energy bills following months of soaring wholesale energy costs, worsened by Russia’s war on Ukraine.
It is paying suppliers the difference between the price cap on energy bills, which reflects wholesale costs, and its energy price guarantee.
Ofgem has dropped its price cap on the amount energy suppliers are able to charge to £3,280 from April 1, down from £4,279 at present. The revision reflects a fall in wholesale prices.
Meanwhile, the Government is reducing the support for bill payers under its energy price guarantee. Household bills will climb by £500 per year, while the amount the government is paying to subsidise households will fall from £1,779 per year to £280.
The price cap is recalculated every three months and prices are set to change again in July. Analysts expect it to fall to £2,112, meaning household bills should fall and the Government will no longer be subsidising households.
Jonathan Brearley, chief executive of Ofgem, said there were signs pressure on energy markets was “starting to ease” but warned a return to pre-crisis bills was unlikely.
He added: “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.”
Ed Miliband, Labour’s shadow climate and net zero secretary, accused the Government of failing to implement a “proper windfall tax on oil and gas companies”.
The Government has raised the tax rate on North Sea oil and gas drillers from 40pc to 75pc, with generous investment allowances.
Mr Miliband said: "Rishi Sunak is too weak to stand up for the British people."
The Government is exploring plans for a so-called social tariff to protect lower income households from high energy costs.
A spokesman for the department for energy security and net zero said: “Government support will continue to help households with their energy bills.
“We know this is a difficult time for families, which is why the Government has covered around half of the typical household’s energy bill this winter.
“By the end of June the Energy Price Guarantee will have saved a typical household in Great Britain around £1,000 since it began in October."