Households face a £500 hike in energy bills this year starting in April – but should see a drop later in the year as the cost of gas and electricity has peaked.
Customers will pay about 20 percent more on their bills from April because the Government’s Energy Price Guarantee (EPG) will only partially protect consumers from paying the full price cap.
The EPG had limited the amount domestic customers pay – which worked out at £2,500 per year for the average household.
However, Chancellor Jeremy Hunt has announced this support was set to become less generous from the beginning of April, rising to an average household bill of £3,000.
It means families facing a financial squeeze will endure high gas and electricity costs for months.
Wholesale gas prices have eased to 18-month lows which has given forecasters hope that bill pressures will come down later this year.
Analysts at Cornwall Insight said it expected the price cap to be £2,153 in July and then hit £2,161 from October. But Dr Craig Lowrey, principal consultant at Cornwall Insight, said the forecast for April means average annual consumer bills will effectively jump by 20 percent.
He added: “While tumbling cap projections are a positive, already-stretched households will be seeing little benefit before July.
“Falling wholesale prices and an increase in the EPG could see the return of competitive tariffs, and with it the chance for consumers to take back some control over their energy bills.”
Peter Smith, director of policy and advocacy at National Energy Action, said: “Only the Government can now stop bills climbing to £3,000 per year for a typical household.
“This would increase the number of fuel-poor households to 8.4 million post-April, up from 6.7 million.”
The regulator’s announcement on price caps will apply from April 1 until June 30. Wholesale gas prices are at their lowest for 18 months but considerably higher than historic norms amid the war in Ukraine.
Andy Mayer, chief operating officer of free market think tank the Institute of Economic Affairs, said: “Whether the price cap increases to £3,000 or stays at £2,500, bills in the summer shouldn’t reach it.
Domestic energy bills before the crisis were about £1,2000 for a ‘typical household’.
“Wholesale gas prices, which influence both heat and power, are falling.
“But, they are still two to three times what they were and won’t fall to the old level, yet.
“Other costs, bailing out failed energy companies, welfare schemes for poorer households, grid upgrades, taxes and older subsidy schemes contribute to higher bills. So expect home prices from £2,000 to £2,300 [for a typical household], while remembering the actual bill depends on your use.”
Lib Dem Leader Sir Ed Davey urged ministers to scrap April’s planned rise in the energy price guarantee and cut bills instead.
Mr Hunt is set to give his spring budget on March 15.
Sir Ed warned the new price hikes will be a “hammer blow” to families and businesses, arguing action is needed now to save people from a “cost-of-living cliff edge”. He said his party would scrap the hike and reduce the average energy bill to £1,971 – the level it was last April.
They would fund the move with their windfall tax plan and by imposing a one-off “bonanza bonus” tax on oil and gas bosses making millions from energy bills, similar to the bankers’ bonus tax in 2009-10.
He insisted Rishi Sunak “must act now to save families from a cost-of-living cliff edge, by cutting energy bills instead of increasing them”.
Sir Ed added: “If there’s no extra energy help for businesses, it will be more than salad and vegetables in short supply as firms, as well as farms, are forced to close.
“It’s just obscene that Rishi Sunak is happy for energy bosses to rake in millions of pounds in bonanza bonuses, while families struggle to put food on the table or heat their homes.”
