Ofgem has reduced the amount energy suppliers can charge households for energy, but bills will rise in April as government assistance wanes.

The announcement by Ofgem does not directly impact what customers pay for gas and electricity.

In April, the typical annual household bill will increase to £3,000.

Campaigners argue that the increase should be halted because Ofgem’s new cap reduces the support cost. The typical annual household bill will increase in April from £2,100 to £3,000. This is due to the Energy Price Guarantee (EPG) becoming less generous and the end of a £400 winter discount on all bills. Currently, the government compensates energy suppliers for the difference between the guarantee and the cap imposed by Ofgem.

The energy price cap was set at £4,279 in January, but due to falling wholesale prices, Ofgem announced it would drop to £3,280 in April.

TUC general secretary Paul Nowak said: “The energy cost is out of control. The government must reverse the April increase. With wholesale gas prices falling, ministers have no reason not to intervene.”

Emily Fry, the economist at the Resolution Foundation, a think tank that focuses on raising the living standards of those with low and middle incomes, stated: “Consumers won’t face average bills of £3,280 this spring, but many will still see a 20% increase as government support is reduced.”

Although the policy was under review, Chancellor Jeremy Hunt previously said that the government lacked the “capacity to launch a major new initiative to help people” Ministers also note that broader support, such as the April increase in benefit payments, will assist individuals.

How much will you pay

A household using an average amount of gas and electricity in England, Wales, and Scotland pays £2,500 annually for energy under the government guarantee.

Since January, this annual bill would have been £4,279 without government assistance. The chancellor has announced that the EPG will become less generous in April, resulting in an annual cost of £3,000 for the average household.

Without the guarantee, the bill would have been £3,280 from April to July, as estimated by Ofgem.

Jonathan Brearley, chief executive officer of Ofgem, stated that April’s bill increase was “deeply concerning” for many people but that there was hope for the future.

He stated that the announcement “reflects the first shift in the cost of wholesale energy since the beginning of the gas crisis, and while it won’t have an immediate impact on consumers, it’s a sign that some of the enormous pressure in the energy markets over the past 18 months may be beginning to ease”.

“Nationally harmful act”

The EPG began in October 2022 and will continue until April 2024. As a result of falling wholesale prices, the cost to the government could be billions less than initially estimated but still shy of £30 billion.

These figures were and continue to be highly volatile. According to the government, the “savings” would be money not borrowed, not a sum that could be spent elsewhere. However, dozens of charities and activists demanded that the government reverse its April plan to increase the average annual bill from £2,500 to £3,000.

Consumer finance expert Martin Lewis says the increase constitutes a “national act of harm.” Nonetheless, he expressed optimism that the government would cancel the increase.

“I do not know if it will cancel that increase, but a rune reading has made me more optimistic,” he said. There is a greater than 50% chance that it will negate that price increase.

Labour wants to stop the increase as well. 

Ed Miliband, the shadow secretary for climate and net zero, stated that Labour would implement a proper windfall tax to prevent April price hikes.

The Liberal Democrats have gone further and advocated for a reduction in energy costs. The SNP has also called for a reduction in energy costs, requesting a “minimum” £500 reduction below the energy price guarantee.

As with any energy price cap, the government guarantee does not limit the total bill. It restricts the energy unit cost.

This winter, the government discounted everyone’s bills by an additional £400, but this assistance expires in April. In Northern Ireland, where the market is more complicated, and many households use heating oil, lump sum payments have also been offered.

Those who pay for their energy using cash or check upon receipt of a bill pay approximately £250 annually more than those who pay monthly via direct debit. 

In April, this difference will be reduced to approximately £200.

Historically, Ofgem has stated that suppliers incurred higher costs for these customers because they were more likely to miss payments.

In April, customers with top-up prepayment meters will have an annual bill of approximately £45 more than the average direct debit customer due to higher fixed costs. During the winter, a 40-year-old woman from the Isle of Wight, who rents a home with a prepayment meter, spent £80 per week to heat her three-bedroom Victorian home.

Mrs Butcher, whose husband has colitis and cannot work, has three young children and two children over 18, and she wants the government to continue the discount scheme it ran this winter – paid via a voucher to those with prepayment meters. “I would like the scheme to continue. The majority of the time, working families are neglected. A reduction in energy prices will not occur shortly, “She stated,

As a result of a grant awarded to the organisation that operates her local food bank, she also received a £50 credit.