Will energy prices go down in 2023?

The Energy Price Guarantee will now be extended, but how much will your gas and electricity cost you in 2023?

The Energy Price Guarantee will now be extended for another 12 months instead of coming to an end in 2023 - but, the extended help will not be as generous. 

In the Autumn Statement (17 November), chancellor Jeremy Hunt said the Energy Price Guarantee, which places the average typical household bill at £2,500 by capping the unit rates, will continue until April 2023. 

From April 2023 until April 2024, the Energy Price Guarantee will be less generous, placing the average typical household at £3,000 instead. That’s a 20% increase in April 2023 from what you are currently paying. 

It is also important to understand that the Energy Price Guarantee does not cap your bill. It is a cap on the unit price, so your actual bill is determined by how much energy you use. 

You should also keep in mind that the £400 energy grant, aimed to help households with rising bills, will also end in March, so the spike in energy costs will be higher.

However, it is still lower than analysts’ predictions of what the energy price rise would otherwise be in April 2023 with current wholesale gas prices. 

Dan Atzori, research partner at Cornwall Insight, said: “The extension of the Energy Price Guarantee (EPG) from April 2023, albeit at the higher £3,000 per year for an average consumer, will be a welcome shield from the higher price cap levels that would otherwise be faced. This will however come at a cost to the government, with Cornwall Insight forecasting that the full cost of the EPG will now be approximately £39bn.”

Earlier this year, Cornwall Insight said it expected energy bills to shoot up by 48%, based on current wholesale prices and based on typical average use, in April 2023. This would have taken the average typical bill to £3,702 from April 2023 – an increase of £1,202, based on average typical use for those on a dual tariff. The extended Energy Price Guarantee will cushion you against this next year.

“Despite the support, an average household bill in April 2023 will still be over £1,000 more than just 12 months ago. While some measures targeted at the most vulnerable were announced, given that these are one-off payments, it will be critical to reassess support going into next winter before longer-term reforms are introduced in 2024,” Atzori added.

Why are energy costs so high?

High energy prices continue to be driven by Russia’s squeeze on gas supplies to Europe. Although the UK only depended on Russia for a small percentage of its gas, before the Ukraine war, it is however still connected by pipeline to the wider European market and Europe depends on Russia for around 40% of its gas supplies, meaning UK suppliers pay a similar price to energy suppliers in Europe.

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