Introduction: Energy firms expect bill help to continue in April
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Hopes are growing that the UK government may reverse plans to lift the cost of energy for households in April.
The BBC reports this morning that some energy firms are preparing to amend bills in expectation that the government will keep support at or near current levels.
Currently, the Energy Price Guarantee limits the cost of gas and electricity to levels where a typical household bill is £2,500 per year. That limit is set to rise to £3,000 in April, and there have been many calls for ministers to change course and maintain current subsides.
According to the BBC’s Simon Jack, those calls may be heeded. He writes:
At the moment, the government is limiting the typical household bill to £2,500 a year, plus a £400 winter discount, which will also end from April.
From 1 April the help is scheduled to be scaled back, which will push bills up.
Fuel poverty campaigners have said the number of households struggling to afford bills could rise from 6.7 million to 8.4 million as a result of the April rise.
However, industry sources told the BBC that some energy companies have already started amending future bills to reflect that energy help will continue at or very near to current levels beyond 1 April.
Earlier this week, a Downing Street spokesperson indicated the plan to raise EPG to £3,000 per year was being re-examined, saying: “All I would say on this is it’s something we are just keeping under review.”
Money saving expert Martin Lewis predicted earlier this week that Jeremy Hunt could maintain current support, saying there was a ‘better than 50/50 chance’ energy bills will not rise in April.
Ofgem, the energy regulator, cut its energy price cap to £3,280, reducing the maximum that a supplier can charge by almost £1,000 per year.
That means that the cost to the government of freezing bills is much lower than over the winter, as wholesale energy costs have dropped sharply since their peaks last year.
🚨The latest @ofgem price cap of £3,280 confirms that the cost of universal energy support – delivered through the Energy Price Guarantee (EPG) – is likely to fall by 89% next year to £1.4 billion.
— Emily Fry (@FryEmily) February 27, 2023
If Hunt doesn’t u-turn, and freeze the EPG at its current level, the cost of living crisis will intensify for millions of households.
Citizens Advice predicted this week that unless the government changes course on planned reductions to the level of support for households under the Energy Price Guarantee, the number of people unable to afford their bills will double, from one in 10 to one in five.
The agenda
-
7am GMT: German trade balance for January
-
9am GMT: Eurozone service sector PMI report for February
-
9.30am GMT: UK service sector PMI report for February
-
10am GMT: Eurozone purchasing prices index (PPI) for January
-
3pm GMT: US service sector PMI report for February
-
4pm GMT: Andrew Hauser, Bank of England executive director for markets, gives speech on the LDI pension scheme crisis (text released at 11am)
Key events
Jeremy Hunt can afford to extend the current energy bill support beyond April, according to Simon French, chief economist at UK investment bank Panmure Gordon.
French points out that last September, when the energy price guarantee was announced, the wholesale gas price was about three times the level it is today.
UK wholesale gas is trading around 120p per therm today, and was 360p/therm in early September.
That means that the amount the Treasury will give to energy companies to cap prices for households and businesses is ‘considerably lower’ than expected in this financial year, and into the next financial year (from April), French told the Today Programme, adding:
Do I expect them to reallocate some of that money to keep the energy price guarantee at its current £2500 level for households? Yes I do.
It’s clear the energy industry expects government support to continue beyond April, says the BBC’s Simon Jack.
He cautions, though, that it isn’t a 100% done deal.
But with one company preparing their bills on the expectation that support will be maintained, and others waiting for a decision to be announced, it appears that the pressure from campaigners such as Martin Lewis has had an effect.
Jack tells the Today programme:
If companies are getting hints that this is going to happen, to the extent they are actually changing their processes and updating their bills in a different way, it’s a pretty clear indication that the intense pressure has actually had an effect and the government is preparing to bow to that pressure.
Introduction: Energy firms expect bill help to continue in April
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Hopes are growing that the UK government may reverse plans to lift the cost of energy for households in April.
The BBC reports this morning that some energy firms are preparing to amend bills in expectation that the government will keep support at or near current levels.
Currently, the Energy Price Guarantee limits the cost of gas and electricity to levels where a typical household bill is £2,500 per year. That limit is set to rise to £3,000 in April, and there have been many calls for ministers to change course and maintain current subsides.
According to the BBC’s Simon Jack, those calls may be heeded. He writes:
At the moment, the government is limiting the typical household bill to £2,500 a year, plus a £400 winter discount, which will also end from April.
From 1 April the help is scheduled to be scaled back, which will push bills up.
Fuel poverty campaigners have said the number of households struggling to afford bills could rise from 6.7 million to 8.4 million as a result of the April rise.
However, industry sources told the BBC that some energy companies have already started amending future bills to reflect that energy help will continue at or very near to current levels beyond 1 April.
Earlier this week, a Downing Street spokesperson indicated the plan to raise EPG to £3,000 per year was being re-examined, saying: “All I would say on this is it’s something we are just keeping under review.”
Money saving expert Martin Lewis predicted earlier this week that Jeremy Hunt could maintain current support, saying there was a ‘better than 50/50 chance’ energy bills will not rise in April.
Ofgem, the energy regulator, cut its energy price cap to £3,280, reducing the maximum that a supplier can charge by almost £1,000 per year.
That means that the cost to the government of freezing bills is much lower than over the winter, as wholesale energy costs have dropped sharply since their peaks last year.
🚨The latest @ofgem price cap of £3,280 confirms that the cost of universal energy support – delivered through the Energy Price Guarantee (EPG) – is likely to fall by 89% next year to £1.4 billion.
— Emily Fry (@FryEmily) February 27, 2023
If Hunt doesn’t u-turn, and freeze the EPG at its current level, the cost of living crisis will intensify for millions of households.
Citizens Advice predicted this week that unless the government changes course on planned reductions to the level of support for households under the Energy Price Guarantee, the number of people unable to afford their bills will double, from one in 10 to one in five.
The agenda
-
7am GMT: German trade balance for January
-
9am GMT: Eurozone service sector PMI report for February
-
9.30am GMT: UK service sector PMI report for February
-
10am GMT: Eurozone purchasing prices index (PPI) for January
-
3pm GMT: US service sector PMI report for February
-
4pm GMT: Andrew Hauser, Bank of England executive director for markets, gives speech on the LDI pension scheme crisis (text released at 11am)
