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Energy bill support to be extended as price rise looms

Energy bill support to be extended as price rise looms

The planned reduction in energy price guarantee is set to be cancelled.
Support for energy bills from the government is expected to continue for three months from April, protecting consumers from an average increase of £500.

Sky News understands the chancellor will cancel a reduction in support that would have seen typical annual bills rise from £2,500 to £3,000.

In recent days, the government has asked energy suppliers to prepare for both scenarios, fuelling a widespread expectation in the industry that existing support will be maintained when chancellor Jeremy Hunt delivers his budget on 15 March.

Energy companies have been asking for guidance ahead of a regulatory deadline to inform customers of impending price changes, which falls this weekend.

Mr Hunt has been under pressure to maintain existing support since a fall in wholesale gas prices drastically reduced the cost of providing financial help to households.

Under the energy price guarantee (EPG) the government effectively caps the price that households can pay and reimburses energy companies for the difference between that, and the cost of buying power on wholesale markets.

Earlier this week energy minister Grant Shapps said he was sympathetic to calls for the EPG to be maintained and that he was "working hard" with the chancellor on the issue.

If the Ofgem price cap system were still in place, reflecting the real cost of energy, annual bills would have been £4,279 from January.

Even on Ofgem's latest calculation, published on Monday, bills would rise to £3,280 next month.

Campaigners say the anticipated extension of current support will prevent millions more households falling into fuel poverty, defined as spending more than 10% of disposable income on energy.

A planned withdrawal of £400 of support for every household is expected to go ahead, meaning one element of the cost to the Treasury of propping up the nation's energy bills, irrespective of income bracket, will fall.
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