MILLIONS of households will save £160 on energy bills, the Chancellor confirmed in the Spring Budget today.
Jeremy Hunt has announced plans to scrap a planned rise to the Energy Price Guarantee to £3,000 a year on average, up from £2,500.
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The Energy Price Guarantee will now be extended for all households for a further three months from April to June.
This will save the average household around £160, the government said.
The Chancellor said: “ Firstly, I recognise that even though wholesale energy prices have been falling, there is still enormous pressure on family finances.
“Some people remain in real distress and we should always stand ready to help where we can.
“So after listening to representations from Martin Lewis and other experts, I today confirm that the Energy Price Guarantee will remain at £2,500 for the next three months.”
Falling energy prices mean the current level of support can be extended to “bridge the gap” until costs fall below the cap.
The Chancellor came under huge pressure to cancel the EPG rise.
MoneySavingExpert.com (MSE) founder Martin Lewis had been urging him to scrap it for months.
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He, along with other experts, have called on the government to reduce the EPG, to reflect the falling wholesale prices.
In February, the consumer expert warned: “You’re going to pay 20% more.”
He said: “The energy price cap doesn’t replace the price that energy retailers can charge consumers, it dictates the price energy retailers can charge.”
Jeremy Hunt also announced that energy firms will not be allowed to charge people with prepayment meters extra fees in a move that will slash costs for millions.
Prepayment meters are disproportionately used by vulnerable and low-income customers but they typically pay £45 extra a year for energy.
The move means that from April 2024, the prepaid price will be the same as that for customers on Direct Debits.
It comes after a national outcry over the bully-boy tactics of companies using debt collectors to force people to have the rip-off meters installed.
What is the energy price guarantee?
Last year, the government stepped in to stop bills rocketing to over £4,000 under the price cap.
It introduced the Energy Price Guarantee (EPG) to limit the average bill to £2,500 – although the more you use the more you pay.
The energy price guarantee was rolled out from October 1. It applies to customers on standard variable tariffs.
It sees the Government limit the price suppliers can charge customers for units of gas, and replaced the price cap set by regulator Ofgem.
From April 1 the EPG was set to go up to £3,000 but the Chancellor has cancelled this, keeping it at £2,500.
What is the energy price cap?
The price cap on energy bills was introduced in January 2019 as a way to ensure that households are not ripped off by their energy suppliers.
At the moment, the Energy Price Guarantee is cheaper – and that is the rate that energy firms charge households.
The price cap changes every three months and it’s expected that by July, the price will be cheaper than the Energy Price Guarantee and that will mean another fall in bills for households.
Gas prices were already increasing last summer as demand bounced as countries emerged from lockdown.
But the situation was made much worse when Russia invaded Ukraine and started to restrict gas exports to Europe.
Gas prices are also decisive for electricity prices.
This is because gas is so important for the generation of electricity.
Over the last year, 42% of the UK’s electricity came from burning gas.
How does the energy price cap work?
The energy price cap works by setting a limit on the maximum amount suppliers can charge for each unit of gas and electricity.
Ofgem sets a maximum daily standing charge which is what households have to pay in order to have their home connected to the National Grid.
The energy price cap only applies to providers’ standard and default tariffs.
This means if you’re on a fixed-term energy deal, the cap doesn’t apply to you.
What else has been announced?
Smokers will see the cost of a pack of cigarettes hit a whopping £11.80 after the Chancellor announced a huge tobacco tax hike which will take effect at 6pm this evening (March 15).
Drivers have escaped a price hike as fuel duty has been frozen for the 13th year in a row and the 5p cut has been kept.
In a double win for The Sun’s Keep it Down campaign, Jeremy Hunt told MPs he wanted to protect hard-pressed drivers in his first proper Budget.
It means drivers will be spared a crippling 12p rise feared – a combination of the end of the cut and an inflationary rise.
Motorists have also been given a boost in today’s Spring Budget as local councils are set to receive £200million to fix potholes.
Meanwhile, the Chancellor is also raising the lifetime pension allowance (LTA) in an effort to keep people in work.
Parents will be £480 a year better off as strict rules on staff-to-children ratios in nurseries has been relaxed.
To help with the cost of living squeeze, the number of kids per staff in nurseries is expected to rise from four to five.
This in turn should see families save £40 a week – or £480 a year.
The maximum amount of cash parents can claim for childcare has also been increased by hundreds of pounds.
The maximum cap for claims per month has remained unchanged for 18 years at £646 for one child and £1,108 for two.
But it will now increase to £950 for a single child and £1,680 for two.
Struggling mums and dads will be better off in a year under the plans, making it easier for them to go back to work.
It’s a major win for The Sun’s Make Universal Credit Work campaign, which has been calling for childcare support to be paid upfront and remove the barrier stopping parents from getting back to work since December 2018.
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