Businesses and households will see government support for energy bills slashed in April, potentially leading to “catastrophic” effects for some, say Cornwall Insights analysts.
Regulator Ofgem will announce its price cap for April onwards on 27 February, determining how much suppliers can charge for energy when government support is reduced.
Sitting at £4,297 currently, Investec analysts predict the cap will fall to £3,332 in April, while Cornwall Insight suggested it could be slightly lower at £3,294.
However, government support for energy bills is also set to reduce, meaning many could face paying more despite falling prices.
According to Cornwall insight, businesses could be charged 70% to 80% more for energy from April 1, likened to a “precarious cliff edge” which could have a “catastrophic” effect for many, said the group’s relationship development head Robert Buckley.
For households, the government will provide support to limit bills to £3,000 a year, from a £2,500 guarantee currently, meaning it would grant the average household £332 from April based on Investec’s forecast.
Government funding for the new scheme will amount to £5.5bn for the year from April, down from £18bn spent in just six months between October and April.
This is aimed to “strike a balance” between support and stemming taxpayer’s exposure, it said in a January press release.
Firms will see prices capped at £302/MWh for electricity and £107/MWh for gas, seeing them pay more than the £211/MWh and £75/MWh promised currently.
Industry members have warned of the dramatic effects reduced support could have.
Some 38% of car retailers responded to a Close Brothers Motor Finance survey suggesting they would not survive sustained higher energy prices.
British Beer and Pub Association chief Emma McClarkin warned that rising energy costs were the “biggest threat” to the hospitality sector, meanwhile.
“We need the government to hold suppliers’ feet to the fire on passing on drops in wholesale energy prices,” she added, referencing gas prices which now sit below pre-Ukraine war levels.