Laura Suter, head of personal finance at AJ Bell, comments on reports that the Government is expected to extend the Energy Price Guarantee:
“It’s a no brainer for Jeremy Hunt to extend the Energy Price Guarantee for another few months, until energy prices fall further. The plan to make the Energy Price Guarantee less generous at the same time as the Government stops the monthly rebate we’ve all been getting off our bills would have landed the average household with an extra £900 on their annual fuel bills in one swipe.
“Wholesale energy prices are falling anyway, meaning that the plans to delay the increase in the Energy Price Guarantee from £2,500 to £3,000 should mean that by the time it kicks in energy prices will be lower anyway. The move is expected to cost the Government around £3bn, but falling wholesale energy prices mean the so far Energy Price Guarantee hasn’t cost the Government as much as expected, providing it with some wiggle room to extend support now. There’s no doubt that Jeremy Hunt would have preferred to unveil the measure during his upcoming Budget, to provide the much-anticipated rabbit out of the hat to grab headlines. But the practicalities of energy companies needing to get their systems in order and notify customers could well put that out of his reach.
“It’s a confusing situation for billpayers, who are having to keep track of two price capping systems: Ofgem’s energy price cap and the Government’s Energy Price Guarantee. The hope is that by the next Ofgem announcement the price cap will have dropped below the Government’s £3,000 guarantee and average bills will be cheaper than that anyway. However, the past few years have taught us not to rely on predictions and there’s certainly no guarantee energy prices will drop that far.
“While the move will protect average households from an extra £500 on their annual bills, it still remains the case that energy bills will cost us all more. The £400 off bills the Government has been dishing out this winter, to the tune of around £66 a month, will still end in April. At the same time, the Cost of Living support payments for those on certain benefits is less generous this year than it was last year – which all adds up to bigger bills.
“The news will disappoint some campaigners who argued that the universal energy support should be ditched and more support offered to those on the lowest incomes. By scrapping the Energy Price Guarantee far more help per household could be offered to the poorest in society who are struggling the most with their bills. But if he extends support for all Mr Hunt will have gone for the popular vote, rather than the more targeted help.”
