Average energy bill forecast to hit £4,347 after Truss U-turn on support
The average annual energy bill will rise to more than £4,000 from April after Liz Truss’s U-turn over her policy to ease the cost of living crisis, according to the sector’s leading forecaster.
The price cap for a typical dualfuel tariff will now be £4,347 in six months’ time if the government does not offer special support, according to the consultancy Cornwall Insight.
The new chancellor, Jeremy Hunt, said on Monday that the energy price guarantee (EPG), which caps the unit price of energy and was intended to last for two years from this month, will now be limited to six months.
A Treasury review is in progress to devise ways of targeting the policy at those consumers most in need of support, which will “cost the taxpayer significantly less” after April.
The quarterly Ofgem price cap had been due to rise 80% to £3,549 from 1 October. Instead, Truss announced the price guarantee scheme designed to limit typical household bills to about £2,500 a year.
Cornwall Insight said it now expects annual bills to equate to £4,347.69 from April to June, with gas at £2,286.70 and electricity at £2,060.99.
The consultancy predicts the price cap easing slightly to £3,697 in the July to September quarter, and then £3,722 from next October until the end of 2023. That is still far higher than the £1,277 annual bills stood at a year ago.
Cornwall Insight welcomed Truss’s decision and called on the government to “develop options for targeted schemes that mitigate the gamble being taken on gas prices, while critically still protecting those who need support, alongside increasing the focus on energy efficiency”.
The consultancy’s chief executive, Gareth Miller, called for the government to use the period in which the EPG is in place to look at more targeted measures and replace the Ofgem price cap, originally devised by the former prime minister Theresa May.
“A world in which we move back to the default tariff cap cannot credibly be one that is among those options, given the heightened cost environment likely to prevail in the medium term and the situation that arose before the EPG was implemented,” Miller said.
Poverty campaigners have raised concerns that households now face a financial cliff edge in April.
The Investec analyst Martin Young said: “Politicians have said they cannot go writing a blank cheque, so we get back to the cost of energy and living crisis for individuals and the uncertainty that brings.
“There are a lot of people who would have found the £2,500 a very difficult number, and now the government is saying it’s not going to be set at that level for all for two years. The amount that can be raised from a windfall tax will also help to determine how to pay for it. We thought that the cost of energy for many had been parked. Now someone’s said: ‘You cannot park there.’”
Separately on Monday, Darren Jones, the chair of the business, energy and industrial strategy select committee, wrote to Jacob Rees-Mogg to raise concerns over the “very extensive” power given to the business secretary in the energy prices bill. The Guardian revealed at the weekend that energy firms are worried it represents a “power grab” by Rees-Mogg.