The government has today confirmed in its Spring Budget that it will not put up energy prices set by the Energy Price Guarantee (EPG) from next month as planned and support will stay at the current rate for another three months.
The EPG will now continue at its current rate until July 2023 instead of rising by 20% on 1 April.
The EPG sets the typical household bill, based on average use, at around £2,500 a year. But, in November 2022, chancellor Jeremey Hunt said the EPG would have to go up by 20% to £3,000 from 1 April until October 2024 as it was simply too expensive for the government to keep the support at the £2,500 level.
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But things have changed since the government made this decision back in November and in fact, wholesale gas prices have been sliding meaning the costs are not as high as expected. Energy prices are around 50% lower than they were in October and it is likely the price drops will filter through to how much suppliers charge to households from July - so the extension of the energy support until July will bridge the gap until meaningful lower prices return to the market.
In a statement ahead of today’s budget, chancellor Jeremy Hunt said: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the Energy Price Guarantee at its current level. With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too."
The extension of the EPG at its current rate is estimated to save households around £160 between April and June.
What will happen to energy prices from July 2023?
Predictions from analysts at Cornwall Insight suggest that from July 2023, the average typical energy bill could be around £2,100 when the energy regulator sets the price cap for Q3.
The expectation of price drops put pressure on the government to keep the EPG rate as it is at £2,500 to ensure households continue to benefit from maximum support; although energy prices are sliding, prices are still higher than they were pre-pandemic and households are still grappling with high inflation and rising interest rates.
The government's EPG rate will now stay in place until July 2023. If predictions for prices from July come true, then the expectation is that this could prompt energy suppliers to bring back fixed rate energy tariffs to offer households energy deals. Sign up to our newsletter to stay up-to-date on the latest developments on energy prices.
Analysis from comparison site uSwitch suggests fixed energy deals may cost around £2,200 to £2,500 a year, based on typical average use, if they come back later this year - but whether you should fix your energy would essentially be a gamble as we do not know what will happen to energy prices later this year as wholesale gas prices are still volatile and subject to change. If you fix and prices continue to fall, then you will not benefit from lower rates - but if, on the flipside, price increases, you will have locked yourself into a cheaper deal. Take a look at our article looking at whether you should fix your energy tariff for more on fixed price energy tariffs.
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