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What is the energy cap and why are energy prices going up? What is the energy price cap and why are bills going up so much?
(about 16 hours later)
All UK households will receive a £400 discount on their fuel bills in October. All UK households will receive a £400 discount on their fuel bills, while people on benefits will get an additional £650.
The government announced the plan as part of a £15bn package of measures to help with steep rises in energy costs. The government says the payments - to help with steep rises in energy costs - will be partly funded by a temporary 25% tax on oil and gas companies' soaring profits.
It will be partly funded by a temporary 25% tax on the profits of oil and gas companies. When will I get the £400 and how will it be paid?
What's been announced? All households in England, Wales and Scotland will be given a one-off £400 discount on their fuel bills in October. This replaces a previous plan to take £200 off bills, which would have had to be repaid over five years.
Chancellor Rishi Sunak told MPs one-off payments will be made to the most vulnerable members of society: Direct debit and credit customers will have the money credited to their account.
people on the lowest incomes who receive help through the welfare system will get £650, to be paid directly into their bank account in two instalments Customers with pre-payment meters will have the money applied to their meter, or paid via a voucher.
pensioner households who receive the winter fuel payment will get £300 The government says customers in Northern Ireland will also get the payments, although the way to do this has yet to be decided.
disabled people will receive £150 (plus the £650 payment if they also qualify for that) Who will get the £650 payment?
All households in England, Wales and Scotland will also be given a one-off discount of £400 on their fuel bills in October. This replaces a previous plan to take £200 off bills, which would have had to be repaid over five years. A £650 payment will be made to more than eight million low-income households who receive Universal Credit, tax credits, pension credit and other means-tested benefits.
So in theory, a low-income pensioner who has a disability could get a £1,500 package this winter. For many people this will be paid into bank accounts in two instalments - in July and the autumn. Payments for those on tax credits only will follow shortly afterwards.
The government says it will deliver equivalent support to people in Northern Ireland, which has a separate energy market. What other help is there?
Disabled people will receive £150 (plus the £650 payment if they also qualify for that).
Pensioner households who receive the winter fuel payment will get £300.
So in theory, a low-income pensioner who has a disability could get £1,500.
UK households to get energy bill discounts of £400UK households to get energy bill discounts of £400
How would a windfall tax on energy firms work?
How fast are energy bills rising?How fast are energy bills rising?
The maximum price which suppliers can charge customers in England, Scotland and Wales is called the energy price cap.The maximum price which suppliers can charge customers in England, Scotland and Wales is called the energy price cap.
At the beginning of April, the price cap rose from £1,277 to £1,971 per year (for pre-payment customers it increased from £1,309 to £2,017). At the beginning of April, the price cap for a typical household rose from £1,277 to £1,971 per year. For pre-payment customers it increased from £1,309 to £2,017. How much you actually pay depends on how much energy you use.
The chief executive of the UK energy watchdog, Ofgem, has said that the energy price cap could rise to about £2,800 from October, when it is next reviewed. Bill are expected to rise even further.
UK energy watchdog Ofgem said the price cap could rise to about £2,800 from October.
Why is the energy price cap rising so much?Why is the energy price cap rising so much?
The energy price cap is based on the wholesale cost of gas and electricity - in other words, the price that energy suppliers pay producers. The energy price cap is designed to protect consumers from short-term changes in prices. It is adjusted every six months (although Ofgem wants to reduce this to three months).
This has been rising sharply over the past year, firstly, because the global demand for gas increased very quickly after the pandemic eased, and secondly because the war in Ukraine has threatened supplies from Russia. It is based on the price energy suppliers pay producers for electricity and gas.
The price cap is designed to protect consumers from short-term changes in prices - currently it is only adjusted every six months (although Ofgem now wants to reduce this to three months). This has risen sharply because demand for gas increased as the Covid pandemic eased, and because the war in Ukraine has threatened supplies from Russia.
The cap means that energy suppliers were not able to pass higher costs on to customers for several months. A number of companies went out of business as a result, and most suppliers stopped offering cheap deals to attract new customers.
The price cap doesn't apply in Northern Ireland, but households there are also seeing bills rise.The price cap doesn't apply in Northern Ireland, but households there are also seeing bills rise.
What's been the effect on customers?What's been the effect on customers?
There have been warnings that UK households are facing a "cost of living catastrophe".There have been warnings that UK households are facing a "cost of living catastrophe".
The cost of fuel is one of the main factors which has driven the UK inflation rate up to 9% - its highest for 40 years. Fuel costs are one of the main factors which have driven the UK inflation rate up to 9% - its highest for 40 years.
Why are prices rising so quickly?Why are prices rising so quickly?
Four things that are going up in price and why There have also been several warnings that many households face what's called fuel poverty - when a household has to spend a high proportion of its income on energy bills.
There have also been several warnings that many households face what's called fuel poverty - this is when a household has to spend a high proportion of its income on energy bills.
The chief executive E.On, one of the UK's biggest energy suppliers, warned recently that up to 40% of customers could be in fuel poverty by the autumn.
Michael Lewis said that about one in eight of the company's customers were already struggling to pay their bills, even before last winter.
What other help is available?What other help is available?
The government also announced that it will double the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families. The government is doubling the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families.
Households in England have already been given a £150 council tax rebate to cope with the rise in fuel prices, if their homes are in bands A-D. Similar schemes are in place in Wales and Scotland.Households in England have already been given a £150 council tax rebate to cope with the rise in fuel prices, if their homes are in bands A-D. Similar schemes are in place in Wales and Scotland.
English councils also have access to a "discretionary fund" for extra payments, including to people living in other council tax bands.English councils also have access to a "discretionary fund" for extra payments, including to people living in other council tax bands.
In Northern Ireland, where there is no council tax system, the government has been given money to make payments, but political uncertainty has meant the cash hasn't yet been released. In Northern Ireland the government has been given money to make payments, but political uncertainty has meant the cash hasn't yet been released.
Confusion over council tax rebate timing
Poorest could miss out on £150 council tax rebate
Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March.Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March.
All the big energy firms have hardship funds, and customers can also get advice from organisations such as Citizens Advice, Turn2Us or the StepChange debt charity.All the big energy firms have hardship funds, and customers can also get advice from organisations such as Citizens Advice, Turn2Us or the StepChange debt charity.
What can I do to save on fuel costs?What can I do to save on fuel costs?
At the moment, fuel providers are not generally trying to tempt new customers with cheap offers, although a few firms, including British Gas and EDF, are offering new fixed price deals to some existing customers, which may be worth considering. Fuel providers are currently not generally trying to tempt new customers with cheap offers. People who are already on fixed deals are advised to stay put.
People who are already on fixed deals are advised to stay put.
Otherwise, households are being encouraged to save money by improving energy efficiency.Otherwise, households are being encouraged to save money by improving energy efficiency.
The Energy Saving Trust says several small changes could help many people off-set some of the recent rises in energy costs. The Energy Saving Trust says several small changes could help people with rising energy costs.