The government has delayed the termination of its energy bill support scheme, providing a temporary respite for consumers. Energy-saving experts advise taking advantage of stored credit and switching energy providers during this time. The energy price guarantee (EPG) will remain at its current level before expiring this summer.
Understanding the EPG and Its Impact on Our Finances
Although the EPG will not increase in April as initially planned, the monthly Cost of Living payments, which assist households with energy bills, will cease at the end of March. Gareth Kloet from Go Compare Energy warns that the average dual fuel energy bill could rise from £2,500 to £3,000.
While individuals have limited control over government energy policy, understanding the EPG and altering our energy usage can help reduce costs and maintain financial stability.
EPG Function and Future Changes
The EPG shields domestic energy from some price increases by ensuring a maximum rate for energy consumption, with the government covering costs above these levels. The EPG is currently set at an average annual cost of £2,500. However, individual bills may vary depending on usage, even with a capped unit price.
In June 2023, the government will maintain the energy guarantee at £2,500 annually for an average household, preventing a 20% increase as initially planned. The exact rates beyond June have not been determined, but both the unit price and the daily standing charge for gas and electricity are likely to increase. The £400 financial aid for energy costs, mainly in the form of monthly supplier discounts, will end in March.
Potential Price Drops and Their Effects
Although the EPG currently protects against high wholesale energy prices, energy costs have been decreasing. Consequently, consumers may pay less than the EPG level later in the year. Cornwall Insight, an energy consultancy, predicts that prices will fall below the guarantee in the third quarter of the year, with average annual gas and electricity costs potentially dropping to £2,362.
If the cap decreases, energy expenses may be lower than the guarantee, but the accuracy of these predictions remains uncertain.
Steps to Take in Preparation for Rising Energy Costs
Since energy bills will likely increase, it is wise to budget accordingly. Kloet suggests providing regular meter readings to energy providers and implementing energy efficiency improvements that may have been postponed during the winter months, such as window and door replacements, boiler servicing, and radiator system flushes.
If wholesale prices decrease, consumers should consider switching providers, as there may be an increase in reasonably priced energy plans in the second half of the year. Kate Mulvaney, a senior consultant at Cornwall Insight, anticipates a revival of affordable energy plans, including fixed-price products, enabling households to benefit from long-awaited savings.
Long-term Considerations for Energy Efficiency
Although energy prices may temporarily decrease as the EPG expires, they are not expected to remain low. Cornwall Insight predicts energy unit prices will rise slightly in the final quarter of the year, emphasizing the importance of enhancing home energy efficiency and monitoring competitive tariffs.
