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Government sets out plan to support people and businesses with energy bills

Business / Thu 15th Sep 2022 pm30 01:04pm

THE government has set out decisive action to support people and businesses with their energy bills, and tackle the root causes of the issues in the UK energy market through increased supply – ensuring the country is not left in the same position again.

The government has announced the following immediate, short-term action to support households:

Replacing the price cap with a new Energy Price Guarantee

The Energy Price Guarantee will ensure that a typical household in Great Britain pays an average £2,500 a year on their energy bill, for the next 2 years, from 1 October 2022.

The consumer saving will be based on usage, but a typical household will save at least £1,000 a year (based on current prices from October). Energy suppliers will be fully compensated for the cost of the Energy Price Guarantee.

£150 of this £1,000 a year saving will be delivered by temporarily suspending green levies. These costs will be transferred to the Exchequer, so customers don’t bear the costs, but benefit from the low-carbon electricity generation.

This is in addition to the £400 Energy Bills Support Scheme. This will be paid in 6 instalments from October.

The most vulnerable UK households will also continue to receive £1,200 of support provided in instalments over the year.

An additional discretionary fund will be available for those households who are outside of the schemes. For example, households not on standard gas / electricity contracts.

How the Energy Price Guarantee will be applied to energy bills

You do not need to apply, and there’s no need to contact your energy supplier.

For consumers in England, Scotland and Wales who pay for their energy through a monthly, quarterly or other regular bill, the Energy Price Guarantee will be applied when your bill is calculated.

Because of the different energy system in Northern Ireland, and the different ways the global energy market impacts different fuel types, the Energy Price Guarantee will have to work a bit differently for some consumers. The government is working with Northern Ireland partners including the NI Utility Regulator and NI energy suppliers to ensure that equitable level of support can be delivered to consumers and businesses in Northern Ireland.

The Energy Price Guarantee limits the amount you can be charged per unit of gas or electricity, so your exact bill amount will continue to be influenced by how much energy you use

If you’re on a pre-payment meter

For GB pre-payment meter customers, the Energy Price Guarantee will be applied to the rate you pay for each unit of energy, so the money you put on the meter will last longer than would otherwise have been the case this winter.

As is the case with the ‘price cap’ under the Energy Price Guarantee there will continue to be a small difference between the unit cost for a pre-payment meter customer and other bill payers.

If you’re on a standard variable tariff

The average unit price for dual fuel customers paying by direct debit will be limited to 34.0p/kWh for electricity and 10.3p/kWh for gas, inclusive of VAT, from 1 October.

These unit prices have been passed to suppliers to ensure that they are used to calculate bills on time for 1 October.

Energy suppliers will adjust standard variable tariffs automatically. Customers on standard variable tariffs do not need to take any action to get the benefits of this scheme.

If you’re on a fixed rate tariff

For those customers on fixed rate tariffs, a ‘floor’ unit price for gas averaging at 10.3p/kWh and for electricity averaging at 34p/kWh for direct debit customers will also come into effect on 1 October 2022. We are introducing a floor because some people will have fixed at much lower prices some time ago, meaning their annual payments will already be below the £2,500 average set by the Energy Price Guarantee.

Unit price reductions of up to 17p/kWh for electricity and 4.2p/kWh for gas will apply to fixed tariff customers to bring their rates down to, but not below, the floor unit price. Customers on fixed rate tariffs that are already below the floor unit prices will continue to enjoy those low rates, but will not receive a further discount for the duration of their fixed term.

For the small number of consumers who fixed at a high rate exceeding the October Ofgem price cap of £3,549, they will receive the full discount of 17p for electricity and 4.2p for gas. However, given the higher starting point, their fixed rate tariff will still have a unit rate that is above the EPG rates. This will ensure that a fair price is paid by everyone.

Energy suppliers will adjust fixed tariffs automatically. Customers on fixed tariffs do not need to take any action to get the benefits of this scheme. Any transfer to a different tariff is a matter for suppliers.

Standing charges

Average standing charges will remain in line with the levels set by Ofgem for the default tariff cap from 1 October, at 46p per day for electricity and 28p per day for gas, for a typical dual fuel customer paying by direct debit.

If you’re not connected to the grid

Those households not on standard gas or electricity contracts, such as those living in park homes or on heat networks – and so outside the scheme – will be no worse off and will receive comparable support through a discretionary fund.

If you pay for electricity as part of your rent

The Energy Price Guarantee is applied per unit of gas or electricity used for households with a domestic electricity connection, so will be applied if your landlord has a domestic electricity contract with a licensed electricity supplier.

Your landlord may be reselling the electricity to you based on your usage, in which case:

Your landlord may charge an ‘all inclusive’ rent, where a fixed cost for energy usage is included in your rental charges, in which case:

  • they are encouraged to come to an agreement with you on the Energy Price Guarantee in line with the arrangement in your tenancy agreement, and we are exploring a full range of options to ensure this happens, including using the planned emergency legislation.
  • the landlord’s fixed charge may already provide you with similar protection from the impact of energy price increases

Click below for more details

https://www.gov.uk/government/publications/energy-bills-support/energy-bills-support-factsheet-8-september-2022#support-for-businesses-and-non-domestic-properties

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