Energy Price Guarantee is extended by 3 months
If you have been worried about the potential rising cost of energy, you won’t be the only person to feel this way. Ofgem announced a lower price cap for energy bills recently, but with government support planned to reduce energy bills still looked likely to increase.
You’ll be happy to hear that for the time being the Energy Price Guarantee discount looks set to continue capping energy bills at £2,500 per year (for standard usage). This will be until at least June 2023, though it is possible the planned rise will take place after this.
If you’re not sure what the Energy Price Guarantee is or how it works, we will explain more on this page. It is a good idea to keep yourself well informed about any changes to government energy support, to prepare yourself for any impact on your monthly bills.
How does the Energy Price Guarantee affect my bills?
Right now in the UK, all households are automatically benefitting from a discount on their energy bills. This is due to the government’s Energy Price Guarantee energy bills support scheme. Energy pricing can vary by region but this scheme is designed to keep pricing at a fair level across the country.
The Energy Price Guarantee:
- Is a government scheme expected to run in Great Britain until the end of March 2024 at latest
- Works to offer UK energy customers a discounted rate for their energy bills, by paying energy suppliers the difference in profits from charging lower prices
- Limits the maximum amount energy customers pay for each unit of energy to £2,500 per year (this is for a typical household’s standard usage, you will pay more if you use more energy than this)
- Was expected to reduce the level of support, by increasing the energy price cap level to £3,000 at the start of April (this now does not look to be happening)
Will the government extend the Energy Price Guarantee again?
In October 2022, the Default Tariff Cap was replaced by the government’s Energy Price Guarantee.
The Energy Price Guarantee is intended to help support UK consumers. This scheme also supports the energy companies, allowing them to charge lower for energy tariffs and gas prices by paying the suppliers any difference in lost profits.
It had been expected that this level of support would begin to reduce in April, making bills at least £500 higher than before (the capped amount increasing from £2,500 to £3,000).
There has been a lot of pressure on Jeremy Hunt and the rest of the government to extend the higher level of support, and this is extension now expected to be announced on the 15TH of March. This will be during the next government budget announcement and follows on from a very public campaign backed by over 85 UK businesses.
Will the Ofgem Energy Price Cap change?
Another thing affecting UK energy pricing is the Ofgem Energy Price Cap. This is a restriction on energy pricing that is set by an independent department (the Office of Gas and Electricity Markets).
The Energy Price Cap makes sure no one is at a disadvantage by choosing an energy supplier that will charge much higher prices than others.
The Energy Price Cap:
- Won’t cap your overall energy bill, but does reduce the amount charged for each Kilowatt hour of energy used (if you use more than the standard amount of energy you could still pay more than the capped amount)
- Is currently higher than the Energy Price Guarantee (£3,280 when paying by direct debit, compared to £2,500) meaning customers are benefitting more from the price guarantee.
- Also restricts how much suppliers can charge as a ‘standing charge’ (the amount you are charged for being connected to the energy grid each day)
- Is reviewed every 3 months and was recently reduced from £4,279 to £3,280
This lower rate does still equal a positive outlook for energy prices moving forward but could increase or decrease again in the future. The Energy Price Cap is affected by factors such as:
- The wholesale cost of things such as gas
- The cost of maintaining the UK energy grid
- Operating costs
- Taxes (e.g. VAT)
- Government schemes and discounts (e.g. the Energy Price Guarantee)