London CNN  — 

The UK government will cap energy costs for millions of households for another three months following criticism that bills were set to rise from April despite a recent plunge in wholesale natural gas prices.

Finance minister Jeremy Hunt announced Wednesday that he would extend the Energy Price Guarantee — which limits the average annual energy bill to £2,500 ($3,037) — until the end of June.

Prime Minister Rishi Sunak said in a statement: “We know people are worried about their bills rising in April, so to give people some peace of mind, we’re keeping the Energy Price Guarantee at its current level until the summer when gas prices are expected to fall.”

The EPG extension is part of the government’s plan to help families with the cost of living and halve inflation this year, he added.

Gas prices tumble

The cap, introduced in October, is lower than the maximum amount suppliers can charge customers per unit of energy set by Britain’s energy regulator Ofgem.

Without the EPG, households would have to pay the equivalent of up to £3,280 ($3,985) a year between April and June, according to the Ofgem formula.

The extra subsidies were due to run out at the end of March despite a significant fall in wholesale gas prices in recent months. The contradiction led to calls for the government to extend the EPG.

Wholesale European gas futures prices, which UK prices are linked to, have tumbled 87% since late August to reach €43 ($46) per megawatt hour, according to data from the Intercontinental Exchange.

“The freezing of the guarantee was always going to be more likely when the falling wholesale cost of energy meant it was set to cost [the government] £5 billion less than forecast,” Susannah Streeter, head of money and markets at investing platform Hargreaves Lansdown, said in a Wednesday note.

The average annual energy bill for UK households has skyrocketed 96% since the fall of 2021, when wholesale prices started to rise. The increases have heaped more pressure on household budgets as the costs of food and other essentials have also shot up.