Ofgem sets new price cap prompting calls for energy bill help

Energy regulator Ofgem has set a new price cap, leading to pressure on the government to offer more support to billpayers ahead of April's price rise.

The announcement will not affect what customers pay for each unit of gas and electricity because that is limited by a government guarantee.

With this cap now set at £3,280 a year for a typical household, it means the cost to government is falling.

Campaigners say ministers should stop a rise in energy bills in April.

In effect, the typical annual household bill is set to rise from £2,100 to £3,000 in April.

Chancellor Jeremy Hunt previously told the BBC that although the policy remained under review, he did not think the government had the "headroom to make a major new initiative to help people". Ministers also point out wider support, such as rising benefit payments in April, will help people.

Under the government's Energy Price Guarantee (EPG), a household using a typical amount of gas and electricity in England, Wales and Scotland is currently paying £2,500 a year for energy. Without government support, that annual bill would have been £4,279 since January.

The chancellor has already announced that the EPG will become less generous in April, which means the typical household will be paying £3,000 a year.

Ofgem has now announced what that bill would otherwise have been from April to July, without the guarantee. It has dropped to £3,280, because of falling wholesale prices.

The government compensates energy suppliers with the difference between the guarantee and Ofgem's cap.

The EPG began in October last year, and is scheduled to continue to April 2024. Falling wholesale prices mean the potential cost to the government could be billions of pounds less than initially thought, but still totalling just under £30bn.

Such figures were, and could still be, highly volatile. The government says the "savings" would be money not borrowed, rather than a pot of money available to spend elsewhere. However, the figures have prompted dozens of charities and campaigners to call on the government to reverse the plan for a typical annual bill to rise from £2,500 to £3,000 in April.

The consumer finance expert Martin Lewis described the bill rise as a "national act of harm". Labour and the Trades Union Congress (TUC) have made the same call.

The Liberal Democrats have gone further and want energy bills to be cut.

The government guarantee, like any energy price cap, does not limit the total bill. It limits the cost per unit of energy.

This is reflected by showing an annual bill for a household that uses a typical amount of gas and electricity - which in April is set to be £3,000. However, a billpayer living in a small, well-insulated flat will use less energy so pay less. Someone in a large, draughty house will pay more.

The government discounted everyone's bills by an additional £400 this winter - with six monthly discounts on bills of about £67 - but this support comes to an end in April. Lump sum payments have also been available in Northern Ireland, which has a more complex market, including many households using heating oil.

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