The government will reportedly spend more than double on safeguarding households against energy bill in the new year.
Despite Ofgem raising the energy price cap, the higher amount will not be seen by consumers who pay for gas and electricity. On the other hand, it means the Treasury will pay 33pm per unit of electricity and nearly 7p per unit of gas for households use across Great Britain.
It will also push up the cost of running the government's energy price guarantee from £7.8 billion in the last three months of 2022 to £15.1 billion in the first three months of 2023, according to estimates by energy consultancy Auxilione. Last week, the Office for Budget Responsibility published its estimates which state that it could cost £6.5 to deal with the fallout from supplier Bulb Energy after its collapse last year.
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If the government waned its support, bills for the average household could be as high as 67p per unit of electricity (instead of 34p) and 17p per unit of gas (instead of 10.3p). Overall, the average household bill would have skyrocketed to £4,279 per year, instead of the £2,500 that will now be paid.
“There is no immediate action for consumers to take as a result of today’s announcement,” Ofgem said on Thursday. The cap is currently set based on what it would cost energy suppliers to buy gas and electricity on wholesale markets.
While the cap still regulates how much suppliers get paid for the energy that customers use, the Treasury will foot the bill on the customers' share. Therefore, the new price cap should have no effect on current bills.
Rocio Concha, director of policy and advocacy at Which?, said: “The news that the energy price cap will hit £4,279 from January will be hugely worrying for consumers but they should remember that their bills are protected against this price increase by the Government’s energy price guarantee scheme.”
He added: “Which? is also concerned that hundreds of thousands of customers on traditional prepayment meters have not yet claimed the government support that is available.
“Energy firms and the Government must work to understand why so many Energy Bill Support Scheme vouchers have not yet been redeemed, and ensure that customers on these prepayment meters – who are more likely to be vulnerable and on lower incomes – are able to access this vital support.”
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