The Government’s energy price cap has been scaled back and will now only be in place until April 2023, rather than October 2024 as promised.
New Chancellor Jeremy Hunt announced the cap, which limited bills for a household with average usage at £2,500 per year, would no longer apply to all from April.
In a short televised statement, he said that the energy price cap was ‘the biggest expense’ in the ‘growth plan’ announced by the current government.
Climb-down: Jeremy Hunt announced that the Government’s energy price cap would only be in place until April 2023
He said the support currently offered would be in place until April but that after that it would be ‘irresponsible for the Government to continue exposing the public finances to unlimited volatility in international gas prices.’
Hunt pledged a ‘Treasury-led review into how we support energy bills beyond April next year’.
He also said that ‘Any support to businesses will be targeted at those most affected’ and that the new approach would ‘better incentivise energy efficiency’.
It is unclear how energy bill support will change from April 2023, but one option is that the cap could become means-tested, meaning only those meeting certain criteria will qualify.
The £2,500 energy price cap was introduced by Prime Minister Liz Truss in early September as one of the first policies of her troubled premiership.
She said that from 1 October, bills would be frozen at £2,500 for two years for typical usage.
The average unit price for dual fuel customers on standard variable tariffs paying by direct debit has been limited to 34p/kWh for electricity and 10.3p/kWh for gas, inclusive of VAT, from this month.
These are average unit prices and it can vary slightly by region.
Prior to the announcement, bills for those not on fixed contracts were in line with the energy price cap set by industry watchdog Ofgem.
This was set to rise from £1,971 a year to £3,549 in October 2022, before the Government’s cap was introduced.
The Government’s cap would therefore have saved customers typically around £1,000 on what they would have otherwise paid.
Ofgem is set to review its price cap once again in April 2023.
In September 2021, the Ofgem cap was £1,277 – meaning that even under the Government cap, the energy bill of the average household outside of a fixed deal had doubled in the space of a year.
Mike Foster, chief executive of the Energy and Utilities Alliance, said: ‘The energy price cap protection coming to an end in April will surprise and worry millions of hard-pressed families.
‘Together with the announcement that promised tax cuts have also been withdrawn will heap huge financial pressure onto those already struggling to pay their bills.’
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