With news that the energy price guarantee is to end in April 2023, rather than run for 2 years as initially promised, many are wondering where this leaves them and whether they should once again consider fixing their energy tariff. In this article, we explain the latest decision by the government, what is likely to happen to energy bills in the coming months and what people can do now to prepare for the potential for energy bills rising again next year.
Energy price guarantee to end in April 2023
Originally introduced on the 1st October 2022, the Energy Price Guarantee was brought in to ensure that the average energy bill for UK households would be capped at £2,500 per year for 2 years. Just a few weeks later, however, in an effort to stabilise public finances and calm financial markets, Chancellor Jeremy Hunt decided to scale back what he described as the 'Biggest single expense in the Growth Plan', ensuring it only remains in place for 6 months, rather than the 2 years initially promised.
What follows now is a Treasury-led review into how the government will provide support for energy bills beyond April next year. The task of the review is to seek a far cheaper solution, one that is likely to only provide support for those that are most in need.
Will the government extend the energy price guarantee beyond April 2023?
The truth is that we just don't know what will happen beyond April 2023. While there may be further government support in 2023 it is unclear in what form this will be offered and who will qualify. In any event, it is likely that additional support should, at the very least, be offered to those that are most in need.
How high will energy bills go in 2023?
Ignoring the energy price guarantee for a second, the current energy price cap set by the regulator Ofgem is £3,549 per year for dual fuel, based on an average UK household. The price cap sets out in law the maximum amount that energy suppliers can charge per unit of gas and electricity and so while the headline number is £3,549 per year, it is important to understand that households may spend more or less on their energy, depending on their actual usage. The energy price guarantee is a government scheme that ensures that UK households pay a lower amount for their energy, equivalent to £2,500 per year for the average UK household. It was due to run from the 1st October 2022 for 2 years but has subsequently been scaled back to just 6 months, meaning it is due to end by April 2023.
There has been no further clarification as to whether further support will be offered with energy analysts Cornwall Insight predicting that energy bills for those that do not receive support could reach as high as £4,347 by spring 2023. This is then predicted to drop down to around £3,722 towards the end of 2023. With the Energy Price Guarantee currently in place, UK households have yet to be exposed to the high prices currently set by Ofgem and with average bills expected to reach £4,347 by spring next year, that represents a shocking 74% rise in energy costs. Perhaps the only silver lining is that the predicted rises come at a time when UK households are likely to be less reliant on their heating.
Is now the right time to fix my energy tariff?
This is tricky to answer because we do not yet know what help, if any, will be offered when the energy price guarantee comes to an end. When Ofgem announced the latest rise in the energy price cap many people rushed out and fixed their energy tariffs only to regret their decision upon hearing about the intervention from the government in the form of the energy price guarantee. While most consumers were able to reach a suitable resolution with their suppliers, it highlighted that there are a number of factors at play when making a decision on whether or not to fix.
To confirm, there are currently no fixed tariffs that offer a cheaper rate than is guaranteed under the energy price guarantee, so sticking with your current tariff is likely to be the best course of action for now. In the coming months, it is likely that we will see more fixed rate tariffs enter the market but they will be considerably more than the current energy price guarantee. You'll need to weigh up the pros and cons of locking yourself into a more expensive fixed rate tariff in the hope that it saves you money in the long run.
What if I can't afford to pay my energy bill?
If you find yourself struggling to pay your energy bills there are a number of things you can do, summarised below:
- Contact your energy supplier - Notifying your energy supplier that you are struggling will help as they are obliged to help you come to a solution. They should be able to discuss an affordable way for you to repay them.
- Pay your bills via your benefits - If you receive certain benefits, such as Universal Credit and Income Support, you may be able to come to an agreement with your supplier for your debts to be repaid directly from your benefits.
- Check for grants and schemes - Contact your energy supplier and ask if you are eligible for any of their grants or schemes on offer.
- Get free debt help and advice - If you are struggling to pay your bills and feeling overwhelmed there are charities where you can seek free help and advice. Find out where to get free debt advice.
Check out our full article 'What to do if your struggling to pay your energy bills' for more information.