Ofgem has announced it will reveal the full scale of the energy price cap hike earlier than expected, as it emerged that the government may introduce a measure to slash £200 from household energy bills in order to soften the blow.
The energy regulator will announce at 11am on Thursday what is expected to be the steepest ever increase in household bills, amid growing speculation that the Treasury is considering a multibillion-pound move to protect households from the full brunt of the increase.
Ofgem is understood to have brought forward its planned announcement on rising energy bills, originally set for this coming Monday, to help ease growing concern and speculation over the maximum energy tariff.
The price cap is expected to climb by more than 50% to reach almost £2,000 a year, up from an average of £1,277 this winter, to reflect the record high gas energy market prices caused by the global crisis in supply.
The surprise decision to move forward the energy cap announcement comes after it emerged that the government is looking at underwriting loans to energy suppliers in order to protect households from rocketing bills.
The Guardian understands the Treasury is considering the “broad-brush financial support” as well as extra payments for vulnerable customers who will be hit hardest by the price cap increase.
The multibillion-pound plan to “top slice” bills would allow suppliers to borrow government money and soften the financial impact on their customers by paying the loans back through higher tariffs over the coming years, according to senior industry sources.
The scheme is one of a number of measures put forward by energy industry bosses to help protect customers against the steepest increase in billls on record.
If the scheme is funded by the industry it could lead to bigger monthly energy payments for a longer period while suppliers repay the loan, but could help to spread the burden on hard-pressed families and avoid a spike in costs.
However, suppliers have told the government that bigger payments for vulnerable families, via the existing Warm Homes Discount, should be funded with public money rather than via the existing levy on energy bills, in order to avoid raising costs for millions of households.
One senior executive told the Guardian the “crude, simple” plan to cut £200 from the average annual dual fuel energy bill, first reported in the Times, would likely be “the only workable” solution to rocketing home energy bills before they reach new record highs from April.
A spokesperson for the Treasury declined to comment on “speculation”.
The government faces rising pressure to agree a set of measures to protect households after months of talks between officials across Whitehall, the Treasury and the industry regulator since gas market prices reached fever pitch in September last year.
A source said the industry was increasingly concerned about the strained working relationship between the business department and the Treasury, as well as the limited role played by Ofgem.
If the cap is increased to £2,000 a year, as expected, it would be the biggest jump since it was introduced in 2019. Ofgem had already raised it by 12% in August for the period from October 2021 to March 2022 to reflect higher wholesale prices.
There are no available energy deals in the UK that are below the price cap, according to Money Saving Expert, a consumer advice website.
