Jeremy Hunt is expected to extend support to household energy bills for another three months after April, in a move that should help ease the cost of living contraction in the country.
Government support will be reduced from next month, meaning average annual bills will rise to £3,000 from £2,500 now.
But the government source said the lower bills are now expected to continue through the end of June, confirming what The New York Times reported on Friday.
The chancellor must submit the budget statement before March 15, when any extension of the support level can be announced.
"The chancellor has made it clear that we will review all our support... In fact, we are doing everything we can to support people who are struggling with soaring energy bills," said a spokesman for Prime Minister Rishi Sunak.
Opposition parties and activists have urged the government to change course and continue providing its current level of aid to families, many of whom are struggling to cope with the rising cost of living even before the bills rise.
Hunt can count on a windfall of around £30bn while he prepares his budget, according to the Institute for Fiscal Studies (IFS).
The Institute for Financial Services estimated this week that it would cost £2.7 billion to maintain the current level of energy subsidies until the end of June, based on current energy price projections.
Under the government's Energy Price Guarantee Mechanism, established last September, taxpayers' money has been used to shield households from the price hikes that followed Russia's invasion of Ukraine.
Wholesale prices are expected to fall during the three months from April to June, which means that the government guarantee will not be required after that period, The Times reported in its article, citing a British government source.
Energy companies, which may include Centrica, Scottish Power and EON UK, are already preparing to adjust bills to reflect the current level of subsidies that will be renewed rather than reduced in April, according to a separate BBC report on Friday.