Energy suppliers will warn customers in the coming days about impending rises to their April bills, despite calls from energy ministers to pass lower wholesale costs.
Trade body Energy UK explained firms will soon be writing to customers, as is legally required, to warn them of price rises, due on April 1 when government support is slashed.
Wholesale gas, which determines other energy prices, has fallen 65% since the ongoing cap was introduced on December 1, far further than the 23% lower price Ofgem is proposing.
But the trade body claimed there was a “limit” on what suppliers, such as Centrica PLC (LSE:CNA) owned British Gas, SSE PLC (LSE:SSE), ScottishPower and E.ON, could do to reduce bills, effectively shutting down any speculation of cheaper bills after Shapps called companies to pass on savings to customers.
Shapps, the UK’s energy security minister, told suppliers on Wednesday they “must be ready” to lower bills as wholesale prices continue to fall from a high in August.
Laying out a wider plan for increased energy resilience in the UK, Shapps suggested the country’s position as a “world leader” in renewables should help to lower prices.
Unless Shapps cabinet colleague Jeremy Hunt unveils news measures in this month's Budget, households can still expect a significant blow as the government reduces support by capping the average household bill at £3,000 from the start of April, up from £2,500 now.
Regulator Ofgem’s price cap is due to fall from £4,297 to £3,280 on an annual basis on April 1, which reflects what an ‘average household’ would pay based on the limit set on what suppliers can charge per kilowatt hour.
Industry experts claim companies have not lowered prices in line with wholesale markets as they often buy energy months in advance, so are bound by previous prices.
Interactive Investor analyst Myron Jobson described this as an “excruciating lag” in the system.