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Supporting the winter energy bill costs the taxpayer £630 per household

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Winter energy bill support is estimated to cost taxpayers an average of £630 per household next year, according to analysis highlighting the size of the government’s price guarantee.

This means the state faces an estimated £16 billion bill to subsidize household energy bills from January to March 2023.

The Resolution Foundation, which paid the bill, said the cost was “eye-popping” but a “price worth paying” to avoid worsening the crisis. The exact amount depends on the energy consumption of each household.

Gas shortages due to Russia’s war against Ukraine have pushed up wholesale energy prices.

Ofgem, the energy regulator, on Thursday set the energy price cap at £4,279 per annum for the period from January to the end of March, a sharp increase to reflect higher wholesale costs.

The price range usually determines how much households pay. However, the government has decided to subsidize bills so that the average household pays no more than £2,500, otherwise known as the energy price guarantee.

The state pays the difference between the ceiling rate and the preferential rate to the suppliers. The January cap rate will cost the state £1,779 a year, although in reality the cap level will change.

However, costs are not evenly distributed throughout the year, with the highest energy consumption occurring in the winter months.

The Resolution Foundation said: “The Energy Price Guarantee will save an average utility bill payer around £630 between January and March next year.

“Due to the high energy consumption in the winter months – 45 percent of annual domestic gas consumption takes place in the first quarter of the year – this is the period in which the benefits (and costs) of the Energy Price Guarantee are greatest.”

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Jeremy Hunt has announced that support for energy bills will be reduced over the coming year, raising the level of the energy price guarantee from £2,500 to £3,000.

However, analysts from Cornwall Insight believe the measure will cost £42bn over the 18 months, up from a previous estimate of £38bn.

Craig Lowrey, lead adviser at Cornwall Insight, said: “With so many households struggling to pay their bills it is essential that support is made available, but it is clear that the energy price guarantee is not a desirable long-term solution”

A spokesperson for the Department for Business, Energy and Industrial Strategy said: “The energy price guarantee protects consumers from rising energy costs, meaning people’s bills will not rise in line with Ofgem’s current increase in the energy price cap.”

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