Ofgem is expected to announce that it will drop its cap on the amount energy suppliers can charge by around £1,000 – but bills could still rise by an average of £500.

According to the latest forecast from energy consultancy Cornwall Insight, the energy regulator is expected to announce a fall in the cap to around £3,295 for a typical household from April.

But customers are likely to pay 20% more – around £500 – because the government’s additional support (the energy price guarantee) only partially protects them from paying the full price cap.

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Dr Craig Lowrey, principal consultant at Cornwall Insight, said: “Regrettably, the forecast for April looks set to leave the price cap above the increased energy price guarantee level, meaning average annual consumer bills will effectively jump by 20% (£500).

“However, this is before we take into account the end of the £400 energy rebate scheme in March, meaning that the cost of energy for households will increase by even more.

“While tumbling cap projections are a positive, unfortunately already-stretched households will be seeing little benefit before July.

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“While prices under the cap remain considerably higher than historic norms, the combination of falling wholesale prices and an increase in the EPG could see the return of competitive tariffs, and with it the chance for consumers to take back some control over their energy bills.”

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The government’s energy price guarantee limits the amount paid by domestic customers to 34p per kWh for electricity and 10.3p per kWh for gas – £2,500 a year for a typical household, although the exact total depends on your usage.

The government picks up the difference between Ofgem’s price cap and the guarantee but this support will be cut back from April, meaning the average bill rises to £3,000.

Ofgem’s price cap is currently £4,279 per year for the average household, meaning the government has been paying an average of about £1,779 per year to energy suppliers for every household between September and March.

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The predicted fall of the price cap to £3,295, and the rise of the energy price guarantee level to £3,000, means the government will be paying just £295 per household per year from April to June.

Cornwall Insight said it expects the price cap to fall further later in the year – to £2,153 in July and then £2,161 from October.

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