Energy Price Guarantee extended for an extra three months
Millions of households will get more support via the extension of the Energy Price Guarantee to help ease the cost of living, the Chancellor has announced today ahead of the Spring Budget.
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The Energy Price Guarantee (EPG) will be kept at £2,500 for an additional three months from April to June, saving a typical household £160.
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Energy prices are 50% lower than forecast in October, but remain high, with this support helping bridge the gap to lower prices forecast from the end of June.
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Comes as Chancellor set to confirm new cost of living support at Spring Budget, including ending the prepayment meter premium and help with childcare costs.
The Energy Price Guarantee, which is protecting households by capping typical energy bills at £2,500, will be maintained at the same level for a further three months over April, May, and June, worth £160 in total for a typical household.
The Chancellor is announcing the extension today (15 March) as part of his Spring Budget, which focuses on easing the impact of rising prices, delivering on our promise to halve inflation, and growing the economy by supporting more people into work.
Government support has already cut the typical family energy bill by over £1,300 since October, stopping the average household energy bill hitting £4,279 a year this winter.
The Chancellor’s three-month extension of the Energy Price Guarantee at £2,500 means households won’t feel the full force of Ofgem’s Price Cap between April and June – which stands at £3,280 – helping to bridge consumers into the summer.
Lower wholesale gas prices are expected to feed through to lower household energy bills from July, where Cornwall Insight data suggests the Ofgem Price Cap will reach an estimated £2,100 a year for a typical household.
From April, more support is coming online with 8 million low income and vulnerable households set to receive at least £900 in cash payments over the next year, benefits and pensions set to rise by over 10 per cent, and the National Living Wage increasing to a record £10.42 an hour, so that it always pays to work.
The Spring Budget will go even further, providing hundreds of pounds more in help with childcare costs for parents on Universal Credit and ending the energy premium paid by households who use prepayment meters, which will save 4 million families £45 a year from July.
Prime Minister Rishi Sunak said:
We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the Energy Price Guarantee at its current level until the summer when gas prices are expected to fall.
Continuing to hold down energy bills is part of our plan to help hardworking families with the cost of living and halve inflation this year.
Chancellor Jeremy Hunt said:
High energy bills are one of the biggest worries for families, which is why we’re maintaining the Energy Price Guarantee at its current level. With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.
Energy Secretary, Grant Shapps said:
Putin’s illegal war has cost British families, which is why we’ve stepped in to pay around half of the typical household energy bill.
With wholesale prices falling families will start to benefit, but in the meantime we’re stepping back in with the Energy Price Guarantee to prevent the typical electricity and gas bill exceeding £2,500. It’s just part of our plan to help families this winter.
At Autumn Statement the Chancellor announced that the EPG was due to rise to £3,000 on April 1, with the Government then expecting to borrow £12 billion to fund this support. Since then, energy prices have fallen by 50%, cutting the borrowing needed to fund energy support by two- thirds to £4 billion.
The change announced today also follows the latest Ofgem Price cap of £3,280 from April to June which, in large part, sets the cost for this three-month extension. Households would pay the full Ofgem price cap rate if there was no Energy Price Guarantee.
Holding down energy bills is also part of the government’s plan to halve inflation this year, and in November the Office for Budget Responsibility said that the EPG would lower the peak rate of inflation.
Further information
The typical family will save £1,500 from the EPG and the Energy Bills Support Scheme, when factoring in the extension.
The total cost of the EPG from April to June is £4 billion. Within this, the additional cost of maintaining the EPG at £2,500 rather than £3,000 is £3 billion.
While the EPG will remain at £2500 on 1 April, there may be small tariff changes as suppliers re-balance between standing charges and unit rates. Implementation of any tariff changes will be determined by the energy suppliers.
The Cornwall Insight data referenced above can be found here.
At Autumn Statement the government announced further support on the cost of living for 2023-24, targeted at those most in need:
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UK households on means-tested benefits will receive a further £900 Cost of Living Payment
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Pensioner households across the UK will receive an additional £300 Cost of Living payment
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People across the UK on non-means-tested disability benefits will receive a further £150 Disability Cost of Living payment, to help with the additional costs they face
From July, households will pay the lower of the Ofgem Price Cap or the Energy Price Guarantee, which will revert to £3,000 from July 2023 until the end of March 2024.