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What does the changing energy price cap mean for you this winter and beyond?

Category: News

As soaring inflation and Russia’s invasion of Ukraine sent energy prices soaring this year, millions of UK households faced stark choices.

The situation was so bad that many feared they would be forced to decide between eating or heating this winter.

This left the government with no choice but to step in.

Since help was first announced, however, there have been several high-profile political changes, both in personnel and approaches to the crisis.

So, what changes have been announced, when will they come into force, and how much will you pay for your energy now and into 2023?

Keep reading to find out.

Rising energy prices forced government intervention

It already seems like a long time since prime minister Liz Truss introduced her Energy Price Guarantee.

Truss’s initiative “capped” the average household energy bill at £2,500 and was originally set to be in place for two years.

It was followed by the Energy Bill Relief Scheme for businesses and other non-domestic customers.

Since then, there has been something of a shake-up on Downing Street, with new occupants at number 10 and number 11.

As Rishi Sunak and Jeremy Hunt looked to shore up the economy while filling a void in the UK’s finances, changes to the schemes were inevitable.

The Energy Price Guarantee applies to energy bills in Great Britain

Liz Truss’s original announcement cut the amount you can be charged for a single unit of energy (compared to the undiscounted amount). The measure cut single unit charges to:

  • 34p a kilowatt hour (kWh) for electricity
  • 10.3p a kWh for gas.

This effectively “capped” the energy bill of an average household at £2,500 for a year. Importantly though, it was a cap on a unit of energy, not on your overall bill. If you use above-average amounts you could still pay more.

Rates vary geographically and are dependent on how you pay. Different guarantees apply in Northern Ireland.

The guarantee is in place until April 2024 but will be less generous from spring 2023

The Energy Price Guarantee was originally put in place for two years, although a March 2023 “review” was quickly added. That review has now taken place under Rishi Sunak.

Jeremy Hunt used his first major announcement as chancellor – the autumn statement – to confirm that:

  • The current guarantee, effectively capping the average household energy bill at around £2,500 a year, will stop at the end of March 2023
  • From April 2023, the guarantee will rise to cap average bills at £3,000 and this measure will remain in place for 12 months.

The current cap (in place from 1 October 2022 to 31 March 2023) will save a typical household in Great Britain around £900 this winter.

Government figures confirm that the new measure, meanwhile (in place from April 2023), equates to an average of £500 support for households in 2023/24. It does, though, mean that you will likely be paying more for your energy in the new year (and much more than you paid last winter).

If this will put a strain on your household budget, get in touch now and we can help you manage your income and outgoings.

Liz Truss also announced help for businesses and other non-domestic customers

While UK households have been understandably worried about rising energy bills, the issue has had a huge impact on businesses too.

With inflation affecting the cost of supplies, business owners also had to worry about keeping the lights on and machinery running.

The government announced its Energy Bill Relief Scheme to provide support for non-domestic energy users, initially between 1 October 2022 and 31 March 2023.

Discounts apply to gas and electricity unit prices for businesses and other non-domestic users like charities, schools, hospitals, and care homes.

Single units of energy have been capped at a “government-supported price” of:

  • £211 a megawatt hour (MWh) for electricity
  • £75 an MWh for gas.

This compares to wholesale costs in England, Scotland and Wales, which (at the time of the announcement) were expected to be around:

  • £600 a MWh for electricity
  • £180 a MWh for gas.

As with the support for domestic energy users, separate discounted rates apply in Northern Ireland.

Budgeting and planning ahead are key to avoiding nasty surprises

Rising energy bills will be a worry for millions of households this winter and into the new year when the current guarantee becomes less generous.

This is especially the case in the current climate of rising inflation and interest rates. Forecasts suggest that the cost of living – and borrowing – will continue to rise into early 2023.

Keeping track of your household budgets, energy usage, and future potential rises is key but if you have any concerns be sure to contact us.

Finally, remember that you do not need to apply for these government measures to take effect. The discounts are automatic. Scammers are quick to adapt to new opportunities and they will be looking to capitalise on energy bill fears.

If you receive a phone call, email, or text message asking you to apply for an energy bill discount or to provide bank or credit card details, this is likely to be a scam. Hang up immediately or delete the message and keep yourself safe this winter.

Get in touch

If you would like to discuss the effect of rising energy prices or any other aspect of your long-term financial plans as we approach a new year, please get in touch and find out how our team of expert planners can help.

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