Energy bills would have risen on average to £4,279 per household from January without the government-funded price cap, industry regulator Ofgem said today.
Under the Energy Price Guarantee (EPG), prices are fixed at an average of £2,500 a year based on a maximum price suppliers can charge of 34p per unit for electricity and 10.3p for gas.
Ofgem said without the cap, people would be paying 67p for electricity and 17p for gas.
One of Jeremy Hunt’s first actions as chancellor was to say the EPG scheme would end next April but this has since been extended for another year, though the cap level goes up to £3,000 from next April.
Treasury forecasts suggest the EPG will cost £120bn, Hunt said yesterday, but that depends on there not being another spike in gas prices.
Energy consultant Cornwall Insight estimates the cost of EPG so far as £42bn, up from £38bn only a week ago due to a rise in the wholesale gas price.
"This highlights the nature of the wholesale market risk that the government is taking on by deciding to extend the EPG ... with the consequence that the full costs may be potentially higher than currently budgeted for," Craig Lowrey, principal consultant at Cornwall Insight told the BBC.
Hunt, meanwhile has urged households to cut down on their energy usage to help ‘crack' the problem'
"We will always be there to help poorer households, the way we do that will change," he told the Treasury Select Committee.
"But for most people, we need you to play your part in reducing our energy dependency on what Putin chooses to do in Ukraine, that's why we've got this national ambition to reduce energy consumption by 15%”, he added.
Martyn Lewis, the high-profile money adviser, has repeatedly warned that the £2,500 average figure is meaningless as the cap is based on usage and is not a cap on bills.
“If you use more you’ll pay more,” he said.