In his spring Budget on 15 March, the chancellor, Jeremy Hunt, announced that he would extend the Energy Price Guarantee (EPG) until the end of June 2023.
So, what exactly does that mean for your bills and what will happen at the beginning of July? Read on to find out.
The EPG extension will keep the average bill at £2,500 a year
The Ofgem price cap, introduced on 1 January 2019, set the average cost of annual standard variable energy tariffs in the UK to £1,137. Over the years since, this has steadily increased, with the average cost now £3,280 as of April 2023.
In a bid to help households with these sharp rises in the cost of gas and electricity, the former prime minister, Liz Truss, launched the EPG on 1 October 2022. This scheme limited what an average UK household would pay annually for electricity and gas to around £2,500 in Great Britain and around £2,109 in Northern Ireland.
According to the government’s official figures, “the EPG will have saved a typical household in Great Britain around £1,100 since the scheme began in October 2022, compared to undiscounted energy prices under the price cap.”
Alongside this, an Energy Bill Support Scheme was introduced to provide households with £400 of account credit or a reduction in direct debit payments. If your supplier provided this funding between October 2022 and March 2023, you will have noticed that your monthly energy bills have increased by either £66 or £67 since April 2023.
The chancellor’s spring Budget announcement will keep the EPG at £2,500 until 1 July, with the government estimating that the average UK household will save £160 compared to the energy prices under the Ofgem price cap.
But what will happen to your energy bills come 1 July?
From 1 July, you will pay the lower of either the EPG (which will be set to £3,000 a year until the end of March 2024) or the Ofgem price cap, currently set to £3,280 a year.
While energy prices are 50% lower than when initially forecast in October 2022, the average UK household will likely still see an annual increase of either £500 or £780 to their gas and electricity bills from 1 July 2023.
Source: moneysavingexpert.com
Thanks to lower wholesale gas prices, Cornwall Insight is predicting that the Ofgem price cap will be reduced to an estimated £2,100 a year for an average UK household later in 2023. If these forecasts prove correct, you could save up to £400 on average on your energy bills each year compared to what you are paying under the EPG.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
