Energy bills set to fall across the UK – but experts issue future warning
The big drop in household energy costs expected in April could be short-lived, experts have warned, as the government is called on to ensure the changes are long-lasting.
Energy regulator Ofgem is expected to announce on Wednesday that the April-June energy price cap will fall by £120 from its current level. The significant drop is due to the government’s move to reduce energy bills by canceling its energy efficiency programme.
This would “provide a clear increase in living standards”, according to the Solution Foundation think tank, adding that this would “help keep bills below current levels until at least 2029”.
A new report from the influential body also touched on the progressive impact of the measure and found that the policy’s design would benefit low-income households the most. Nearly a quarter (24 per cent) of households will save more than £200 this year.
The researchers found that the changes would also make the typical energy bill £200 lower in real terms than by 2024; this is a welcome decline following the pressures of the Covid pandemic and the cost of living crisis.
But they added that this could be eroded in just three years. They estimated that policy costs and investment in network infrastructure meant bills would be just £60 lower on average in March 2029 than today, with the end of the government’s rebate scheme a month later adding a further £55.
The Resolution Foundation said this represented a “cliff edge” as the government would have to decide whether to let bills rise or find funding to extend support. He added that ministers should “not wait until the eleventh hour to decide” and should instead create a permanent framework before 2029.
Jonathan Marshal, chief economist at the Resolution Foundation, said: “Next week’s energy price cap announcement will see a significant fall in household bills, largely due to the government’s £6.9bn energy bill cut.
“The policy is well designed. It supports the transition to electrification by lowering electricity unit rates and at the same time saves the poorest families twice as much as the richest families as a share of expenditure.
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“But this support is expected to end in April 2029. The government must create a clear and durable framework for deciding which energy policy costs will be funded by bills and which will soon be financed through taxation, to avoid scrambling for an election-year solution.”
A Department for Energy Security and Net Zero spokesman said: “This government is delivering on our promise to cut costs by an average of £150 from bills from April 1. Ofgem will set the final price cap figure next week as usual.
“Tackling the energy affordability crisis is our number one priority, and this is just the beginning.
“To completely reduce bills, we are getting off the rollercoaster of volatile fossil fuels and switching to clean domestic energy that we control.”
