Prime Minister Liz Truss’ Energy Price Guarantee was brought in this month, described by Jeremy Hunt as a ‘landmark’ policy, and thought to cost up to £150bn. Superseding Ofgem’s energy price cap, the EPG was one of Truss’ key policies, set to be in place for two years, however, following the financial uncertainty sparked by the mini-budget, this has been scaled back to 6 months.
The Chancellor explained on Monday 17th October that he and Truss agreed that it ‘would not be responsible to continue exposing public finances to unlimited volatility in international gas prices.’ While no one can predict what wholesale energy prices will look like come spring, energy analysts at Cornwall Insight (opens in new tab) have revealed their early forecasts.
(Image credit: Future PLC)
Energy Price Guarantee ends April 1
Cornwall Insight suggests bills will rise by 73% in April, to £4,347 a year, and then drop to £3,722 next winter. These figures are based on the average household of 2.4 people, and how much you pay depends on how much energy you use, so finding ways to save energy at home will make a difference to the amount you actually pay.
These are very early predictions that assume that Ofgem’s energy price cap will continue in its existing format, which is not a certainty. Cornwall Insight says that constructive attention now needs to turn to what a replacement scheme would look like from April; a scheme that will ensure those who need support receive it and that will form the basis of a sustainable and fair market.
Following the announcement that the domestic Energy Price Guarantee will end in April 23, Cornwall Insight has released approximate Price Cap forecasts for an average consumer for the period from Apr 23 – Dec 23.Apr-Jun: £4,348 p/aJul – Sept: £3,697 p/aOct – Dec: £3,722 p/aOctober 17, 2022
‘A world in which we move back to the default tariff cap cannot credibly be one that is amongst those options,’ says Cornwall Insight, ‘given the heightened cost environment likely to prevail in the medium term and the situation that arose before the EPG was implemented.’
(Image credit: Future PLC / Lizzie Orme)
Jeremy Hunt closed his speech by emphasising that the government’s priority in making the difficult decisions ahead ‘will always be the most vulnerable.’
But Martin Lewis, founder of Money Saving Expert (opens in new tab) said that if Cornwall Insight’s predictions of £4,347 a year from April are in the right ballpark, then ‘the promised “targeted help” will need to be targeted up into middle incomes for people to get through this. Especially if it stays at those levels for the next winter.’
It’s a very uncertain time for wholesale energy prices, which have been impacted by reduced supplies due to the war in Ukraine and the rise in energy consumption as we came out of the pandemic. This all feeds into how we understand our gas bills and how much we pay as consumers.
Because of this volatility and questions around what form the price cap will take, we can’t know what will happen in spring, but we’ll be keeping this article updated.
