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Changes to the energy price guarantee

Changes to the energy price guarantee

 

The new Chancellor of the Exchequer – Jeremey Hunt – has this week announced some changes to the government support being offered to consumers around home energy costs. 

So, what are these changes, and what does it mean for your finances? 

 

Background

As most readers will be aware, domestic usage of both electricity and gas has been subject to a per unit energy price cap in recent months.  The latest cap took effect from 1 October 2022, and represented a huge potential rise in costs from less than £2,000 per annum for a typical household, to more than £6,000 per annum. 

So steep was this increase that the government stepped in on 8 September and announced that they would provide additional state support – known as the energy price guarantee – effectively limiting the price cap for a typical household to £2,500 per annum.  This change took place on 1 October 2022, and was originally intended to continue until 30 September 2024. 

The £2,500 level is however someway higher than that being paid by consumers in September 2022, and this gap has been partially bridged by the additional £400 of state support promised by (then) Chancellor Rishi Sunak earlier this year.  

This effectively reduces the current price cap from £2,500 per annum to £2,100 per annum for a typical household in the winter ahead. 

 

Recent events

Unfortunately, the financial turbulence and disruption following the “mini” budget in September has forced a rethink of the level of financial support that the government can now safely offer. 

That said – and very importantly – the energy price guarantee of £2,500 will continue to be honoured until 1 April 2023 for all consumers, as will the £400 discount which will be paid in instalments this autumn too.   

This means that all domestic consumers will have some certainty as to energy costs in the winter ahead. 

 

What happens after April 2023?

The energy price guarantee will however change from April 2023. 

The Chancellor has announced a review of how to support energy costs from that date, and the intention is to design a new approach that will cost the taxpayer significantly less than previously expected, whilst still ensuring enough support is made available for those in need of it. 

This suggests that state support for home energy usage will in future be more targeted towards those who are reliant on very low incomes and/or some level of state benefits.  However, the full listing of who will (and will not) benefit will not be available until the review is complete.  We will of course update this hub with news of the review once concluded.   

 

We would however stress that there is no change in the period from now through to 1st April 2023.

In the meantime, we would encourage you to consider if there are any areas where you can (safely) reduce use of home energy.  Some ideas and thoughts on this topic are included in our “Controlling Spending” video on the hub. 

Finally, if you are struggling to pay your energy bills now, then please contact your energy provider to see what other support or options can be offered to help you in this respect.     

 

Sever Herbert

Wellbeing & Benefits Director

24/10/2022