Households are still facing a £67-a-month energy bill increase from April despite the “welcome” extension to the Energy Price Guarantee (EPG) at its current rate until the summer.
Ahead of his Budget speech, Chancellor Jeremy Hunt confirmed that the EPG, which limits a typical household energy bill to £2,500, will be extended for another three months.
It had been due to increase to £3,000 in April to reduce the burden on state finances.
Citizens Advice chief executive Dame Clare Moriarty said the “welcome step” of extending the existing EPG would protect millions of people from unaffordable energy bills.
But she added: “Unfortunately it’s not all good news. The withdrawal of the Energy Bill Support Scheme will still mean the average monthly bill rises by £67 from April.
“With millions already unable to afford their bills and energy prices set to remain high in the years ahead, the government must now look at long-term solutions to this problem.
“Many people, especially those on low incomes, will need ongoing support not only to pay their bills but to make their homes safer and warmer through improved energy efficiency.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This will come as an enormous relief for the millions of people who are already struggling to pay their bills, and were facing the threat of price rises with abject horror.
“Unfortunately, we’re not out of the woods yet. The loss of the monthly discount from April is still going to hit hard as we’ll need to find an extra £67 each month from somewhere.
“Already 48% of people are finding it difficult to pay their energy bills – rising to 54% among those in their 30s and 40s. Meanwhile, more than one-in-20 have fallen behind on their bills (6%). This rises to one-in-seven of the fifth lowest earners.
“For these people, the removal of the £67-a-month discount is going to mean even bigger bill nightmares.”
The Government had come under increasing pressure in recent weeks to cancel the rise to the EPG, which was set to come into force from April 1.
As wholesale energy prices have dropped, it has become increasingly affordable for the Government to continue protecting customers with the same deal they are on now.
Energy prices are now 50% lower than forecast in October and are projected to continue dropping.
Without the Government’s help, the average household would have been paying an annualised bill of almost £4,300 between January and April. But the support reduced that to £2,500.
This means that the Government has been paying around £1,800 toward each household’s energy bills.
From April, without support, the bill would have reached around £3,300 for the average household, according to the latest Ofgem price cap announcement.
From July, lower wholesale gas prices are expected to feed through further to customers, with Cornwall Insight data predicting the Ofgem price cap will reach just over £2,000 a year for a typical household.
Mr Hunt said: “High energy bills are one of the biggest worries for families, which is why we’re maintaining the energy price guarantee at its current level.
“With energy bills set to fall from July onwards, this temporary change will bridge the gap and ease the pressure on families, while also helping to lower inflation too.”