Jeremy Hunt should hold energy price guarantee at £2,500 as Ofgem lowers price cap

Ofgem’s price cap is set to come down but the government’s energy price guarantee will rise, sending bills higher, writes James Moore

Ofgem’s price cap is currently set at £4,279 per year for the average household (PA)

The cost of energy is tumbling, and so is Ofgem’s energy price cap. The cap, which had equated to annual gas and electricity costs of £4,279 for a typical household paying by direct debit, has fallen to £3,280.

That figure is currently irrelevant to consumers as a result of the government’s energy price guarantee (EPG), which holds bills at £2,500. This is where it starts to get perverse. Because, while wholesale energy prices have fallen by a lot, and the cap is going to fall by a lot, the price the consumer pays is going to rise by 20 per cent to £3,000 under plans formulated by chancellor Jeremy Hunt.

True, the new cap and guarantee figures cover the three months from April to the end of June, when householders’ energy costs are, obviously, lower than in the winter.