Last week Ofgem announced that its default tariff cap from April – the regulator’s benchmark-setting ‘price cap’ – will drop nearly £1,000, to £3,280 a year for a notional ‘average’ household.
Even though energy price watchers might be deed into thinking bills will fall in consequence, it’s the rising rates of the EPG that should alarm them, advises Dr Craig Lowery, principal consultant at Cornwall, pictured.
“If the government goes ahead with its proposed plans to raise the EPG limit from an average £2,500 to £3,000 a year from April, far from falling, typical consumers could see their bills skyrocket by £500”, Lowery writes.
“The government will be saving £2.5bn by raising the EPG, but this will come at a cost to households, he counsels.
Despite a small relief caused by the drop in price cap, Lowery warns: “The proposed increase in costs will still be difficult for many consumers who were relying on the EPG to safeguard their finances from unpredictable market trends.
“Instead, they will now be faced with the daunting prospect of having to pay significantly more for their utilities from April.
“In addition, households will also be losing the £400 Energy Bills Support Scheme (EBSS) payment which has also helped shield them from the immediate impact of rising energy costs on their household budgets.
Falling wholesale prices for gas following co-ordinated European action to switch away from Russian supplies have led to secure or even falling retail energy prices in Britain’s continental neighbours.
The consultancy’s modelling predicts that if the EPG were to increase to £3,000 as planned, the estimated cost would be £26.8bn. If it were to remain at £2,500, the estimated cost would be £29.3bn. If the government were to keep the EBSS for another three months the estimated cost would be £5.8bn.
This morning, a D-ESNZ spokesperson said the government expected suppliers to pass on savings from falling wholesale rates to consumers in coming weeks.
“Government support will continue to help households with their energy bills. By the end of June the EPG will have saved a typical household around £1,000 since it began in October”, the spokesperson said.
But Citizens Advice, the charity tasked with a duty in law to oversee how energy prices affect poor households, today echoes warnings from Labour that the EPG rise will have disastrous effects.
“Without further support from the government, this April will spell catastrophe for millions of households”, CA head Dame Claire Moriarty said.
“Unless the government changes course on planned reductions to the level of support for households under the EPG, we estimate the number of people unable to afford their bills will double, from one in 10 to one in five.
“The government must keep the EPG at its current level of £2,500. Recent drops in wholesale prices mean they have the headroom to do this. The alternative is millions more people unable to keep their house warm and keep the lights on.”