How the Mild Winter Will Affect Energy Bills This Year
November 2022 was the third warmest on record, according to the Met Office, with an average temperature of 8.2°C. Because the winter has currently been quite mild, people haven’t had to rely on their heating as much. This could mean that energy bills will be reduced later this year, according to a recent forecast. The Energy Price Guarantee was originally ending in April this year, but was extended until 2024. While it’s currently at an average of £2,500, this will increase to £3,000 from 1st April 2023.
As the warm weather has been covering Europe, gas hasn’t been used as much, which has led to increased storage levels. This has had the effect of dropping wholesale gas prices as the demand has been lower. Despite the guarantee dropping to a less generous £3,000, the drop in gas prices could see typical energy bills of £2,800. The forecast, by Cornwall Insight, believes it unlikely that energy bills will return to pre-pandemic levels for many years as the energy industry is incredibly volatile.
Wholesale prices of gas are falling and many European countries have filled up their storage facilities. Providing the lower prices stick around, energy consumers will benefit later on in 2023. Cornwall Insight predicts energy bills to stick around £2,800 between October and December as a result of this. Having said this, any cold snaps or escalating global tensions as a result of Russia’s war with Ukraine could derail these estimates.
European gas pipelines from Russia have mostly been cut off, so stockpiling gas has been a relatively slow process. It’s only thanks to the warmer weather that this has been able to happen so quickly. If we see further cold bursts throughout 2023, these gas reserves will be depleted and will be more difficult to restock, which will lead to higher prices next winter.
The level of support for struggling households has always been a contentious issue. Some believe that the £400 energy discount is unlikely to be repeated in 2023, which has seen the rise of fresh calls on the government to offer more support for households in desperate need. According to the government website, 8 million of the lowest income households will receive £900 in support, compared to £650 that was given out last year. Pensioners will receive another £300 and people on disability benefits will receive another £150 this year.
It’s worth a reminder that the current Ofgem price cap is at £4,279, which is much higher than the guaranteed prices from the government. The government ensures the prices consumers pay for electricity are lower, but it costs them in the process. The Energy Price Guarantee is currently set to cost the government about £37 billion, which will eventually be recouped from the general population through taxation. While the support is here now and to stay for the time being, everyone in the UK will eventually have to indirectly pay it back.