Increasing EPG would be a ‘catastrophe’

Increasing the current Energy Price Guarantee (EPG) would be a “catastrophe” that would send millions more Brits into fuel poverty, the government has been warned.

Calls to keep the EPG at its current level have been reiterated by suppliers and consumer charities following the latest price cap announcement by Ofgem.

Despite the regulator confirming the cap was to decrease by almost £1,000 from April, to £3,280 for a typical dual fuel direct debit household, prices still remain well-above pre-crisis levels.

There are concerns by some that if the EPG is not kept at its current £2,500 level, fuel poverty levels will increase.

Following the announcement Energy UK chief executive Emma Pinchbeck highlighted that customers will be shielded from paying the full amount by the EPG, which will continue to cap energy bills until March 2024.

She added: “However, from April 2023 the EPG is expected to rise to £3,000/year – £500 higher than it is now – which combined with the end of the separate monthly rebate payments, will mean most people’s bills will rise significantly.

“Falling wholesale costs means the EPG has cost the government a lot less than had been anticipated so we, alongside many charities and consumer groups, are urging them to use this surplus to hold the EPG at £2,500 – and to announce that quickly so it can be incorporated in customer bills in time for April.

“That the Ofgem cap has decreased so much does give some cause for optimism that if the pattern continues, bills will fall later this year and we will begin to see cheaper, fixed deals back in a functioning, competitive market.”

Similarly fuel poverty charity National Energy Action (NEA) also raised concerns about the impending reduction to the EPG, with worries fuel poverty figures will soar.

NEA boss Adam Scorer said: “Ofgem’s cap announcement is moving in the right direction. It shows that wholesale prices are reducing from their extraordinary peak and has some reduction to premium paid by prepayment customers and those paying by cash or cheque.

“But it is still the UK government who will determine prices in the short term and unless it changes its stance on reducing the value of the level of the Energy Price Guarantee, average bills will increase by £900 a year in April.

“That would mean another 1.7 million more UK households in fuel poverty, up to 8.4 million households. Keeping the EPG at its current level is necessary and affordable. It would avoid unnecessary harm to the most vulnerable in society. UK government should announce it today.”

Citizens Advice boss Clare Moriarty said: “Without further support from the government, this April will spell catastrophe for millions of households.

“Unless the government changes course on planned reductions to the level of support for households under the Energy Price Guarantee, we estimate the number of people unable to afford their bills will double, from one in 10 to one in five.

“The government must keep the EPG at its current level of £2,500. Recent drops in wholesale prices mean they have the headroom to do this. The alternative is millions more people unable to keep their house warm and keep the lights on.”

Disability equality charity Scope meanwhile raised concerns about what the government’s decision to reduce support will mean for disabled consumers.

James Taylor, the charity’s director of strategy, said: “We know budgets are stretched beyond breaking point. In April disabled households having to find on average another £500 a month is going to be an impossible challenge. At the same time government support is being stripped away.

“Extending the existing price guarantee of £2,500 would have been a sensible short-term response from government, instead they are increasing it which will push more disabled households into making impossible decisions.

“We need a long-term solution because life costs more if you are disabled. The government must introduce a discounted, social energy tariff for disabled people.”

Elsewhere Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit (ECIU), called for more investment in energy efficiency measures as a way of reducing costs to consumers.

She said: “The old energy system where gas dictates the price of both heating and electricity has left households paying much higher bills because of volatile international gas prices.

“The ban on cheap onshore wind and low government ambition on improving uninsulated homes has left a higher burden for bill and tax payers alike.

“Will the government now boost investment in insulation and electric heat pumps which would help to reduce our gas dependence and improve energy security? All eyes are on the chancellor and Spring Statement.”

Support for customers post April will be a key theme at the Utility Week Customer Summit on 21 and 22 March in Birmingham. Find out more here.