Speculation is mounting that the UK Government is set to cancel a planned £500 increase on energy bills for the average household from the start of next month following a campaign led by Martin Lewis.
The consumer champion told BBC Radio 4’s Today programme last week that he thinks there is now an “85 per cent chance” the £2,500 Energy Price Guarantee will not increase to £3,000 from April 1.
In a letter to Jeremy Hunt last month, the founder of MoneySavingExpert.com warned the Chancellor that 1.7 million more people could be pulled into financial hardship if he does not freeze prices in the spring. The letter has been supported by over 110 charities and organisations and in a tweet on March 3, the financial journalist said that “all unofficial indications now show it looks like we've now won this campaign.”
His comments come after two separate reports from the BBC and the Times that the UK Government is close to deciding to keep bills unchanged.
Energy bills are currently capped at 34p per unit of electricity and 10.3p per unit of gas for households across the country - for the average home that means a bill of around £2,500 a year. But this is only possible with UK Government support, which is set to become less generous from the start of April, a move which will push average bills to around £3,000.
The UK Government’s £67 monthly credit/discount/vouchers, which are part of the £400 Energy Bills Support Scheme, is also due to come to an end this month.
Martin told Today host Nick Robinson: “I was saying earlier in the week, reading the runes, it was a better than 50 per cent chance that the price wouldn’t go up.
“I’m hearing they have not been told that the rate is staying. They have been told that there is an attempt to keep the rate at £2,500.
“So we’re not at the smoking gun stage that this is definitely happening, but I would say we’re at an 85 per cent likelihood that the price won’t be going up.”
Some energy companies are already assuming that the UK Government's energy support will not become less generous from the start of April, the BBC reported on Friday morning, citing industry sources.
The Times cited a source in Westminster who said that the UK Government would keep the energy price guarantee at the £2,500 level for another three months.
Martin said: “If there's no U-turn, you'll pay 20% more than you do now. If there is a U-turn, you'll pay exactly the same as you do now."
The downside to extending the support on energy bills is that it will cost the UK Government money, but the price to keep protections the same for households until July will only cost the Treasury an extra £2.5 billion, compared to raising the guarantee by £500, according to analysts at Cornwall Insight.
This is less than a tenth of the total cost of the scheme since September last year.
This is because wholesale energy costs are falling. At the moment the UK Government is paying the equivalent of around £1,800 per year towards the average household's energy bill.
Even if the UK Government keeps support at today's levels that will fall to around £800 from the start of April and get reduced to £0 from July, according to current forecasts.
Ofgem has announced it is lowering its energy price cap - the amount suppliers are able to charge - from the current £4,279 per year to £3,280 for the average household, effective from April 1. The regulator said the reduction of almost £1,000 reflects recent falls in global wholesale energy prices.
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