The government’s dramatic reduction of its two-year price freeze means that a typical UK household’s annual energy bill could surge next year to £4,347, according to energy consultants’ estimates.
In his first announcement as Chancellor, Jeremy Hunt said yesterday that the energy price guarantee would now only apply to everyone for six months until April 2023, instead of until October 2024. The guarantee, announced by Liz Truss last month, limits the cost to households of each unit of energy and was designed to limit the average household’s bill to £2,500 a year.
Hunt’s announcement means that, for most households, in six months’ time bills will be regulated once again by the price cap set by Ofgem, which the consultancy Cornwall Insight predicts will equate to an average of £4,347 a year. The typical annual bill will then briefly decline to £3,697 during the summer months before increasing to £3,722 next winter. Last winter the average energy bill was £1,277 a year.
Hunt said that the most vulnerable will continue to be protected beyond April 2023, and the Treasury will review how all households and businesses can be supported from this point on. “Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency,” Hunt said.
Gareth Miller, chief executive of Cornwall Insight, said that the shortening of the guarantee was “inevitable”. “It will be vital that a Treasury led review avoids falling into a public finance led approach that is too far removed from social and economic realities for households. Hearts as well heads will need to be engaged,” he added.