In response to Ofgem’s announcement on the price cap, Energy UK’s Chief Executive, Emma Pinchbeck, said:
“Customers will be shielded from paying the full amount announced today by Ofgem as the Government’s Energy Price Guarantee (EPG) will continue to cap energy bills until March 2024.
“However, from April 2023 the EPG is expected to rise to £3,000/year – £500 higher than it is now – which combined with the end of the separate monthly rebate payments, will mean most people’s bills will rise significantly.
“Falling wholesale costs means the EPG has cost the Government a lot less than had been anticipated so we, alongside many charities and consumer groups, are urging them to use this surplus to hold the EPG at £2,500 – and to announce that quickly so it can be incorporated in customer bills in time for April.
“That the Ofgem cap has decreased so much does give some cause for optimism that if the pattern continues, bills will fall later this year and we will begin to see cheaper, fixed deals back in a functioning, competitive market.
“In the meantime energy suppliers continue to provide a range of extra support for their customers, including contributing millions of pounds to additional funds, and hiring and training staff to identify and provide extra care for vulnerable customers.”
Notes to editors:
- The price cap is calculated based on a range of costs energy suppliers face, which includes wholesale costs as well as policy costs, network charges, operating costs and VAT.
- It is set at level at which Ofgem states that suppliers will make little or no profit.
- Annual figures for both the price cap and EPG are based on a typical domestic consumer with medium energy use, what customers will pay will vary depending on how much they use and payment type
- The last Energy Bill Support Scheme payments will end in March. This scheme saw a discount of £66 applied to their energy bills in October and November and £67 each month from December through to March 2023
- Vouchers for Prepayment customers are issued with a 3-month validity period as standard, beginning on the date the voucher is issued. The validity period for all vouchers will end by 30th June 2023.
- Whilst the wholesale price of gas has fallen in recent weeks it needs to be sustained at a low level before we see lower energy bills. This is because suppliers buy energy in advance, known as hedging. Suppliers do this to shield their customers and themselves from the sudden price spikes that they would otherwise experience buying energy on the short-term (spot) market. This works both ways – when prices started to rise in 2021, bills weren’t impacted immediately.
- What matters is the average futures price during the roughly 2.5 month observation window ending one month before each price cap period, as this is when Ofgem expects suppliers to do most their hedging. For the April price cap, this would be between December and February – when the future curve was a lot higher on average during that period than it is now. Additional information in Energy UK’s explainer here
- More about supplier support for customers here: https://www.energy-uk.org.uk/index.php/energy-industry/support-for-winter/8310-supplier-support.html
- 14 energy suppliers covering 90% of the retail market have now signed up to Energy UK’s Vulnerability Commitment which goes above and beyond existing regulations