A BIG change to the energy price guarantee has been announced by the new Chancellor today – we explain what it means for your bills.
As part of a number of mega mini-Budget u-turns announced by Jeremy Hunt this morning, the guarantee will be cut short.
The guarantee came into force in October, and was meant to run for two years, freezing every typical household's bill at £2,500.
But now the help will end in April, meaning it will only run for six months.
After that, support households will get will be targeted – which could mean millions face soaring energy bills once the guarantee is up.
It comes as:
- The energy price guarantee of average £2,500 a year bills will be only capped until April – with support for the richest households to end after that
- The 1p off income tax planned for next April has been junked
- The planned reforms to offroll pay working will go ahead as planned – and won't be ditched as Kwasi Kwarteng wanted
- Cutting VAT for foreign tourists visiting the UK will be ditched
- The cuts to National Insurance and slashing of stamp duty will remain
- That comes on top of the u-turn not to ditch the top 45p rate of tax, and to ditch plans to cut corporation tax – which have already been announced
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We explain what the shake-up will mean for your energy bills.
What's happened to the energy price guarantee?
The energy price guarantee was rolled out from October 1, and was meant to save the typical household £1,000 per year over the course of the guarantee.
It applies to customers on standard variable tariffs.
It sees the Government limit the price suppliers can charge customers for units of gas, and replaced the price cap set by regulator Ofgem.
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But Mr Hunt said the help would only be in place for six months instead of two years.
It means we don't know what will happen when the energy price guarantee will end in just a matter of months time.
It is also not known which households will get the targeted support after this point, and whether bills will still be fixed for eligible households at £2,500.
Mr Hunt said that a Treasury-led review on how energy bills will be supported after April will be launched.
National Energy Action chief executive Adam Scorer said that the move has "created huge uncertainty" for households.
He said: "Everyone knows why decisions have been made at breakneck speed, but there are questions that need to be answered, and answered quickly.
"Households on the lowest incomes are already rationing their energy usage to dangerous levels. £2,500 is beyond their means.
"Many vulnerable people were holding on by their fingertips. Government has to be very, very careful it doesn't prise them away.”
What does it mean for your energy bills?
Mr Hunt hinted that bill help could come if energy prices remain high for hard-up households.
Targeted support will likely help the most vulnerable and poorest customers, which means richer households will not get as much help.
It seems unlikely that any help households will get will be as significant as the £2,500 energy price guarantee due to the cost of the scheme.
He said: "The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need."
It is not known what will happen for customers on fixed tariffs.
Customers on these deals have been told they will receive a discount under the guarantee – and it is not known what will happen now.
It will come as a concern to customers who signed up to pricey fixed deals in a bid to avoid eye-watering bill hikes, which were set to go up to more than £3,500 before the guarantee.
We've asked energy companies what will happen in this case and we will update you when we know more.
What help can I get for my energy bills?
The £400 energy bills rebate is still set to continue despite the shake-up to the guarantee.
The payment will be made up of six discounts between October and March next year.
Households will receive a £66 energy bill discount in October and November and a discount worth £67 in December, January, February and March.
We've listed how the leading energy suppliers plan to pay households the discount and are waiting on others to respond.
The way you'll be paid will depend on how you pay for your energy.
If you're on a credit meter the discount will come off your bills, but if you're on a prepayment meter you'll get a voucher.
Check with your supplier to confirm how you'll receive the cash.
In November, a £300 one-off "Pensioner Cost of Living Payment" will be paid out to eight million households.
It will be given to those who already get the winter fuel payment – which is worth between £100 and £300 for those over the state pension age.
Millions of households are in line to get the £150 Warm Home Discount between December and March 2023.
There are plenty of energy grants and schemes open to help you out if you're struggling.
British Gas has recently confirmed that it'll pay its most vulnerable customers grants worth £750 to help with sky-high bills.
The British Gas Energy Trust has previously paid struggling households up to £1,500 – and you don't need to be a British Gas customer to apply for this help.
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Ask your supplier what's on offer and how to apply, or check here:
- Bulb energy fund
- EDF's energy customer support fund
- E.on's energy fund
- Octopus Energy Octo Assist fund
- Ovo's debt and energy assistance
- Scottish Power's hardship fund
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