Grant Shapps ‘sympathetic’ to ditching energy bill rise

The Energy Secretary says he is “very sympathetic” to suggestions the Government should halt a proposed £500 hike in annual energy bills from April.

Grant Shapps said he is “working hard” with Chancellor Jeremy Hunt on the issue.

There are warnings that a million more households could face problems when bills start to rise again.

The Government caps the typical annual energy bill at £2,500 but this will increase to £3,000 from April 1st.

The Treasury has so far resisted calls to extend the system at current levels.

However, the cost of providing the Energy Price Guarantee (EPG) has fallen sharply in recent months as wholesale gas prices have fallen, which has pressured Mr Hunt to change course.

A growing number of pundits believe the chancellor could use the March 15 budget to scrap the hike.

National Energy Action estimates that 1.5 million more households will be pushed into energy poverty as a result of bill hikes currently scheduled for April. This usually means that they have to spend more than 10% of their income on energy.

Mr Shapps told The Times newspaper: “I fully recognize the dispute over maintaining this price guarantee and the Chancellor and I are working very hard on this.

“I understand very well that we protect ourselves [people]. We’re looking at it very, very closely.”

Without the government’s energy price guarantee, a typical household gas and electricity bill would have reached £4,279 a year as of January under the energy price cap set by Ofgem, the industry regulator.

In normal times, the cap caps the amount utilities can charge per unit of energy.

According to Ofgem, the price cap will fall to £3,280 a year from April and most analysts expect it to fall below £2,500 from July, at which point the government would no longer need to subsidize households.

In theory, this means that the government would only have kept the energy price guarantee at the current level for the three months from April to July. But Mr. Hunt has said he doesn’t have the financial “footprint” to do so.

But the IFS think tank believes the Treasury could afford the estimated £2.7 billion cost as government borrowing was lower than expected this year.

IFS Director Paul Johnson said it would be a “very easy thing for them” and politically advantageous.

Consumer finance expert Martin Lewis said he believed the government was more likely to cancel the proposed increase than go through with it.

And Torsten Bell of the Resolution Foundation think tank – which focuses on low- and middle-income people – estimated there was only a 10% chance of the energy price guarantee being changed in April.

However, any late government decision could cause some confusion among billpayers.

Energy suppliers must inform their customers about price increases at least one month in advance.

A less generous price guarantee would cause prices to rise in early April, and so companies would write or email their customers on Wednesday.

Any subsequent decision by ministers to leave the system at its current level would mean that suppliers would have to write a second letter to their customers explaining the situation.

On Monday, Energy UK, which represents suppliers, said: “Falling wholesale costs mean the EPG has cost the Government much less than expected so we join many charities and consumer groups in urging them to use this surplus to keep the EPG at £2,500 – and to announce this quickly so it can be included in customer bills in time for April.