After the Government reduced taxpayer support, households will have to pay an additional £500 for their energy in the next year.
The “energy price guarantee” has been changed by the Chancellor. This means that household bills will be around £3,000 per annum starting in April.
This compares to the typical annual bill of £2,500 for households that are covered by the current energy price guarantee, which was in effect since October to protect them from rising wholesale energy prices.
It was supposed to remain at this level for two more years. However, Jeremy Hunt cut the support in a move Treasury claimed would save £14bn.
As the Chancellor attempts to find a balance between cutting state liabilities and protecting those who are most in need, vulnerable households will be provided with additional support.
After a spike in wholesale energy prices exacerbated by Russia’s war against Ukraine, which could have led to fuel poverty for millions of people, the state intervened.
Fuel poverty campaigners warn that the crisis faced by struggling households is likely to get worse now that support has been cut.
In parliament, Mr Hunt stated that “one of the greatest worries for families are energy bills.
“From April, the Energy Price Guarantee will be maintained at a higher level than £3000 per annum for the average household.
“With the prices expected to rise through next year, this will still translate into an average £500 support for each household.”
The typical annual bills covered by the guarantee are currently £2,500 and £3,000 starting in April. These levels compare to the pre-crisis £1,277 levels for October 2021.
Liz Truss In one of her first acts as premier, she established the energy price guarantee. This was in response to warnings that annual bills could rise above £5,000.
After taking over the nation’s finances during the chaos caused by Truss’s mini-Budget, Jeremy Hunt has been forced to resign.
The support will be extended to April 2024 instead of October 2024 as originally planned.
According to the Treasury, the guarantee will result in taxpayers paying £37.4bn-£24.7bn for 2022-23 and then £12.7bn over the next five years. This compares with previous projections of £30bn in October and March.
If wholesale prices fall, typical bills could be lower than £3,000 starting in April. However, current expectations don’t suggest otherwise.
All households are eligible for the energy price guarantee. Households on means-tested benefits receive the additional cost of living payments in the amount of £900 next year.
Pensioner households will be paid £300, while those on disability benefits will be paid £150.
National Energy Action, a charity that fights fuel poverty, stated that the breathing room for struggling households will now be “shorter-lived” and “less helpful”.
Adam Scorer, chief executive said that there was no way out of the energy crisis facing struggling households. It looks like it will get worse for most.
“Some of the most vulnerable households and groups will be helped by the announcement of targeted support for energy bills and welfare payments, which will boost welfare payments.
“This is important, but these measures have big gaps, especially for low-income households that are not on means-tested benefit.”
He stated that other vulnerable groups such as carers or people with medical conditions were at “acute risk” of being left out in cold weather unless local authorities support them.
The energy price guarantee limits the amount that energy companies can charge households per unit of electricity or gas. Depending on how much they use, individual household bills may vary.
The difference between the energy price guaranteed rate and the unit rate permitted under the 2019 price cap on energy bills, which was introduced to reflect wholesale costs, will be paid by the state to energy companies.
According to current projections, the price cap for energy bills could reach £3,640 per household in April. This would mean that the state would pay approximately £640 per household to keep typical bills below £3,000.
The price cap and household bills could be lower than £3,000 if wholesale prices drop sharply. However, current projections suggest that the price limit will be higher than £3,000.
Martin Young, an analyst at Investec said that “our April [price caps] estimate now stands at £3,640 and our July estimate is at £3,107.
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