Warning energy bills may rise above £4,000 in April

Typical household energy bills could reach £4,347 a year from April after the government said it would scale back support, an analyst has estimated.

Cornwall Insight's forecast comes after the chancellor said the energy bill help, which had been due to last for two years, would be cut in April.

The government said the most vulnerable would continue to be protected from soaring energy prices.

The forecasts could change depending on movements in wholesale energy prices.

The new Chancellor, Jeremy Hunt, announced the change to the energy price support as part of a package of measures designed to save money after the government's mini-budget left a big projected hole in the public finances.

On Monday, he said "it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices".

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The government's Energy Price Guarantee, which limits the price that suppliers can charge for each unit of energy, was originally put in place for two years from 1 October.

Now it will only be in place for six months, covering this winter, with the Treasury reviewing the support given from April.

Under the current cap consumers still pay for the gas and electricity they use. A typical household - one that uses 12,000 kWh (kilowatt hours) of gas a year and 2,900 kWh of electricity - currently faces an annual bill of £2,500. That is up from £1,277 last winter.

The details of support from April will be decided following a review, Mr Hunt said. He said those on lower incomes would be supported and there will be incentives to be more energy efficient.

Predictions from Cornwall Insight suggest that, for households that do not receive any support, a typical annual energy bill could be £4,347 in the spring, dropping to £3,722 next winter.

The loss of the two-year cap will introduce a "considerable amount of anxiety about the future again", Nigel Pocklington, boss of renewable energy supplier Good Energy, told the BBC's Today programme.

Mr Pocklington, whose firm has about 300,000 customers, said that his reassurances to people were based on the government "buffering them from the high levels of energy market through the winter".

However, on "current calculations without the government support", he estimated that the average energy bill would reach around £4,300 in April, dropping below £4,000 by the summer.

"These are extraordinarily high levels compared with what we are used to paying," he said.

Sharing this concern, Mary Starks, former executive director for consumers and markets at energy regulator Ofgem, told the Today programme that the move had put people back into a position of "great uncertainty".

On the promise of targeted help, Ms Starks criticised the government for being "very unclear" because who will be affected and how it will work has not been explained.

"Even extending eligibility to everyone on universal credit is administratively complicated.

"The number of households who will be struggling will be a lot bigger than that so there is more work needed to do the targeting," she added.

Expensive scheme

The original plan to cap prices for two years - thought to cost up to £150bn - was to be funded through government borrowing after the prime minister rejected calls to extend a windfall tax on oil and gas firms.

However, former Chancellor Kwasi Kwarteng followed it with plans to cut taxes by some £45bn.

Concerns about rising borrowing sparked turmoil on financial markets which spilled over into the mortgage market, where interest rates on loans have surged to 14-year highs.

On Monday, as he announced the review of the energy support, while also reversing £32bn worth of the planned tax cuts, Mr Hunt said he was doing "what is necessary for economic stability".

He added that the Energy Price Guarantee had been "the biggest single expense" of Mr Kwarteng's growth plan.