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Energy price guarantee: What help is there for gas and electricity bills? Energy price cap: What is it and will bills continue to go down?
(about 2 months later)
Energy bills for a typical household in Britain will remain at £2,500 until the end of June. They had been due to rise to £3,000 a year from April. Households will see a significant fall in their energy bills from July after a drop in the price cap, which limits how much suppliers can charge households for each unit of energy they use.
However, the £400 discount on bills which most households received this winter has come to an end. A typical household will now pay £2,074 a year on its gas and electricity bill, Ofgem has said.
What are the energy price guarantee and energy price cap? It will mark the end of a government's Energy Price Guarantee which, since October, has limited the typical bill to £2,500.
When prices soared after Russia's invasion of Ukraine, the government announced a limit on the amount households could be charged for each unit of energy they use. What are the energy price cap and Energy Price Guarantee?
This energy price guarantee means bills for a typical household for gas and electricity are about £2,500 per year. In recent years, prices for variable tariff energy deals in England, Wales and Scotland have been controlled by the the energy price cap, which is now set every three months by Ofgem, the energy industry regulator.
That maximum limit had been scheduled to rise to £3,000 a year from April, but the government announced that it would continue at the same level for the next three months. The chancellor says this will save the average family £160.
The guarantee is scheduled to be in place until April 2024.
Prices will then be controlled by the return of the energy price cap, which is set every three months by Ofgem, the energy industry regulator.
It confirms the maximum price suppliers can charge households per unit of energy on a standard - or default - tariff in normal circumstances.It confirms the maximum price suppliers can charge households per unit of energy on a standard - or default - tariff in normal circumstances.
Five tips for cutting energy costs this winter When prices soared after Russia's invasion of Ukraine, ministers said household bills would be limited by a government guarantee instead. Under this, since October, a typical household's annual gas and electricity bill has been £2,500 (even though Ofgem continued to set its own cap at a higher level).
The Energy Price Guarantee will expire at the end of June which means that, from July, the Ofgem cap will determine households bills again.
Because the wholesale prices paid by suppliers have fallen, forecasters expect the typical annual bill to drop to about £2,050.
Energy is regulated separately in Northern Ireland, where bills will be held at £1,950 per year for an average household.
Will energy bills continue to go down?
That is impossible to tell for certain, not least because wholesale prices are affected by global issues, such as the war in Ukraine.
However, energy consultancy Cornwall Insight predicts that the July reduction for households in England, Wales and Scotland will be followed by a further drop in October, when it expects the typical annual bill to be £1,976.
Forecasting beyond that timescale is difficult, but it currently believes the typical bill will rise again to £2,045 in January.
It does not expect energy prices to return to pre-Covid levels before the end of the decade at the earliest.
What if I'm on on a prepayment meter?What if I'm on on a prepayment meter?
As well as an extension to the energy price guarantee, the government has also promised to bring prepayment energy charges in line with those for direct debit customers. The government has promised to bring prepayment energy charges in line with those for direct debit customers.
This should save households about £45 a year on their energy bills from July. This means the cap should be the same for both forms of payment.
However, those who pay via cash, cheque or bank transfer, usually every three months, will pay significantly more.
Ofgem argues these customers are more likely to fall into arrears.
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Do I live in a typical household?Do I live in a typical household?
The calculations for a typical household are based on a direct debit customer using 12,000 kWh (kilowatt hours) of gas and 2,900 kWh of electricity a year.The calculations for a typical household are based on a direct debit customer using 12,000 kWh (kilowatt hours) of gas and 2,900 kWh of electricity a year.
A kilowatt hour is a unit of energy used to calculate your bill.A kilowatt hour is a unit of energy used to calculate your bill.
However, most households aren't typical.However, most households aren't typical.
Bills are based on how much energy you actually use, which depends on the number of people, the type of property and its energy efficiency.Bills are based on how much energy you actually use, which depends on the number of people, the type of property and its energy efficiency.
What extra support will be available? Will this mean the return of switching?
The government has already announced that some groups across the UK will receive further help from April: Lower prices should signal the resumption of competition in the market, as suppliers start to offer fixed deals to customers.
That means people will be able to switch supplier for a gas and electricity price that is set for a certain period of time. Unlike variable tariffs, they are unaffected by the cap.
Consumer groups and regulators say that could be good news for consumers, but warn that such deals will not suit all circumstances.
If variable deals continue to fall in price, anyone who locks into a fixed deal would miss out on those savings.
Anyone considering signing up for a fixed deal should also pay close attention to standing charges and exit fees, rather than just the headline rate.
What extra support is available for energy bills?
Some groups across the UK who may struggle to pay bills are receiving additional help through cost-of-living payments:
£900 to households on means-tested benefits - paid in three instalments in spring, autumn and spring 2024£900 to households on means-tested benefits - paid in three instalments in spring, autumn and spring 2024
£300 for pensioner households £300 for pensioner households next winter
£150 to people on certain disability benefits £150 to people on certain disability benefits, being paid in the coming weeks
What help is the government providing with energy bills? Vulnerable families can also claim help through the Household Support Fund, and - from October 2023 - the Warm Home Discount scheme.
When will energy prices come down? Importantly, the £400 discount which all households in England, Wales and Scotland received during the past winter has finished.
In recent months global energy prices have been falling, and experts predict cheaper prices for households later this year. Government rules out more help on energy bills
Analysts at Cornwall Insight think Ofgem's energy price cap will fall to £2,153 in July, and remain close to that level for the rest of the year.
That would make the government's energy price guarantee redundant by July.
Cornwall Insight says at this point households might once again be able to shop around for more competitive energy deals.
What help are businesses getting?
Up until the end of March, businesses had their costs limited under the government's energy bill relief scheme:
Under a new scheme, firms will now get a discount on wholesale prices, rather than costs being capped.
Heavy energy-using sectors, like glass, ceramics and steelmakers, will get a larger discount than others.
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What help have people already had?
Those in Northern Ireland are receiving a single payment of £600, more than in the rest of the UK, because of the widespread use of heating oil.
Eight million low-income households who get certain benefits or tax credits have received £650 in two payments.
Pensioner households got £300 and some disabled people were paid £150.
This help was being partly funded by a temporary windfall tax on oil and gas companies.
Vulnerable families can also claim help through the Household Support Fund, and the Warm Home Discount scheme.
What can I do if I can't pay my energy bill?What can I do if I can't pay my energy bill?
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What help are businesses getting?
Until the end of March, businesses had their costs limited under the government's Energy Bill Relief Scheme.
Under a new scheme running until March 2024, firms get a discount on wholesale prices, rather than costs being capped.
Heavy energy-using sectors, like glass, ceramics and steelmakers, will get a larger discount than others.
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Related TopicsRelated Topics
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