The UK Chancellor could be in line for an £11billion windfall, with experts predicting the worst of the European energy crisis has passed.
In a timely boost ahead of next month's Budget, Jeremy Hunt has gained extra financial firepower thanks to the shrinking cost of the energy price guarantee.
Gas prices have plummeted since the guarantee was launched, dramatically cutting how much the government must pay to keep household energy bills down.
Under the scheme, bills are being subsidised to March 2024, limiting what a typical household pays this winter to the equivalent of £2,500 per year.
In mid-November, the Treasury said it expected the total cost of support to be £37.6billion.
But, with gas prices having plunged since then, analysts at Cornwall Insight and the Institute for Fiscal Studies said they now expect the final figure to be roughly £11billion lower, or around £26billion.
18-month low
The Telegraph says this comes after the benchmark European price for natural gas hit an 18-month low, following a mild winter which reduced demand for heating and kept Continental gas storage levels high.
Tom Edwards, a senior modeller at Cornwall Insight, said that "barring another major crisis", it looked as though prices would settle at a new level higher than before the Ukraine crisis but far below the worst peaks of the past year.
He said: "All things being equal, it looks like we're probably not going to return to the spikes that we saw last winter.
"That was the market trying to reshape global supply chains and, to a large extent, those global supply chains have now been reshaped."
But experts warn that China's economic reopening could still drive gas prices higher, while unexpected cold snaps could create fresh headaches for Europe before the winter is over.
Still, the drop in gas prices looks set to give Mr Hunt a much-needed windfall as he is facing demands for personal tax cuts from Tory MPs, as well as calls for green subsidies from businesses and other measures to tackle a labour market crunch.
Less tax take
But Emily Fry, of the Resolution Foundation, has warned that falling energy prices would reduce the amount of tax the Treasury collects from oil and gas producers and electricity generators.
At present, a government guarantee sees the annual gas and electricity bill for an average home limited to £2,500. That cap will rise to £3,000 in April, but forecasts suggest the limit will soon become redundant.
Cornwall Insight say a typical bill will drop back to £2,153 in July.
The energy consultancy expects the annual bill for an average household to remain at close to that level for the rest of the year.
Commenting on the £11billion windfall, a Treasury spokesman said: "Wholesale prices falling is good news, but as we have all seen prices are volatile and can increase as fast as they fall."