Households to save £100 on energy bills as emergency support extended
Households are to save an average £100 on their energy bills after the Chancellor extended emergency support for another three months.
Jeremy Hunt confirmed the state will continue to subsidise energy bills at a level which sees typical households pay no more than £2,500 annually until June, rather than allowing this to rise to £3,000 in April as planned.
He said the move, which has been enabled by a fall in wholesale energy prices, would help families “bridge the gap” until summer bills are expected to be lower.
Analysts said it would cost taxpayers about £2.6bn.
The Chancellor also announced measures to try and develop clean energy supplies in the long run, including a plan to encourage investment in nuclear energy and support for projects to capture carbon dioxide emissions. Critics warned these did not go far enough, however.
Mr Hunt is still grappling with the fall-out from more than a year of high wholesale energy costs, which started climbing in late 2021 and leapt following Russia’s invasion of Ukraine, triggering a cost of living crisis.
To shield households from this rise in costs, the Government introduced the Energy Price Guarantee, under which typical households should pay only £2,500, and taxpayers will make up the difference to suppliers.
This was due to rise to £3,000 from April 1, but will now be kept at £2,500 until June instead.
By that point, analysts at Investec expect prices to have fallen to an average £2,056 even without government money to hold them down. Wholesale gas prices have fallen owing to mild weather during winter.
Investec said the move to keep the Energy Price Guarantee at £2,500 until June would save households about £100 compared to moving it to £3,000 as planned.
Caroline Abrahams, charity director at Age UK, said the move was welcome but that people on low incomes are nonetheless still in a difficult position.
Mr Hunt is also changing the rules so that households who pay by prepayment meter are no longer charged more for their energy than those who pay by direct debit.
Campaigners argued he should do the same for the 5.5 million households, often older people, who pay by cash, cheque or bank transfer, as they also pay a higher rate.
Peter Smith, of charity National Energy Action, said: “We shouldn’t leave those on standard credit out in the cold.”
In an effort to boost energy supplies over the long term, the Chancellor confirmed plans to classify nuclear energy as a “green” investment, helping it attract finance from a wider pool of investors.
Mr Hunt wants one quarter of electricity to be provided by nuclear power by 2050. A new government unit, Great British Nuclear, will try to get nuclear projects off the ground, focusing on small-modular reactors (SMRs), which are supposed to be cheaper and quicker to build than conventional large reactors.
However, the Government dealt a blow to the ambitions of Britain’s top engineer, Rolls-Royce, which wants to build a fleet of the reactors in the UK, by opening the process up to competition.
The Government will choose designs for SMRs to back with taxpayer funds out of dozens being touted by companies around the world.
While Rolls could press on with foreign or private orders, the move left executives at a loss to explain why the Government would part-fund development to the tune of £210m and then raise the prospect of not buying its models themselves.
They were also concerned that a lack of British orders would also put off other prospective buyers. The company is trying to court the Czech Republic as a customer.
As part of the push to net zero carbon emissions, the Chancellor also announced up to £20bn in support over several years for projects to strip carbon dioxide emissions from factories and power plants and stash them underground.
Projects are due to be backed by government guarantees on their revenues, funded by levies on bills. The Government wants 20-30 million tonnes of carbon dioxide to be stored and captured by 2030 to help meet net zero goals.
However, Energy UK, the energy trade body, warned that problems hampering the development of green energy, such as slow electricity connections, planning applications and rising costs, had not been addressed.
It called on the government to “act now” to address concerns that “threaten the billions of pounds of investment needed for the build out of low carbon generation”.
The Government is planning a “Green Day” in late March when further measures for green growth are likely to be set out, Bloomberg reported.