In an effort to help households, the government implemented the Energy Price Guarantee which came into effect on Saturday 1st October 2022, which means sadly the price of your energy has gone up.
The Energy Bills Support Scheme payment grant all households £400 off their energy bills from October 2022.
Your energy supplier will pay this through your electricity suppliers. You do not need to apply for this scheme as this will automatically be applied to your bill.
But what does this mean, and what can you do to reduce your energy bills? I have detailed this in this blog post for you.
What is the Energy Price Guarantee?
The UK Government announced that energy prices will be frozen at £2,500 per year for the average UK household for two years in an effort to households struggling with the rapid increase in energy bills over the past year due to the market being volatile.
What has happened?
In August, Ofgem (an organisation that regulates the energy market) announced that the price cap level will increase to £3,549 which is an 80% increase in bills for the average household compared to the previous cap of £1,971.
There has been financial pressure on UK households and the government has recognised this. To support households in the UK the government announced the Energy Price Guarantee that has frozen the cap at £2,500 for two years. This is still too high compared to what households were paying last year but not as high as compared to the proposed figure that the wholesale energy market was looking to implement.
I am on a standard variable tariff, how does this affect me?
The price cap level is the cap on the unit rate and not the cap on your final bill. Your bill will still depend on your usage so the less energy you use the less you pay and the more you use the more you pay.
Also, the £2,500 is indicative of an average household use paying by direct debit and not a figure for everyone.
In the below table, I have listed the Energy Price Guarantees’ average unit rate with the standing charges.
in the second table here, I have listed the region-specific rates and standing charges under the Energy Price Guarantee.
This is the better outcome for households compared to the unjustified increase to £3,549, your energy bill will still be higher than last year. So you are probably wondering, well what are my options then?
Well, I am on a fixed tariff what does this mean to me?
The Energy Price Guarantee is different for fixed tariff customers depending on the unit rates they are fixed at.
If you’re on a fixed tariff with unit rates below the Energy Price Guarantee:
Luckily, you will still be able to stay on these rates until your fixed deal ends, at which point you’ll be rolled onto your supplier’s standard variable tariff at the Energy Price Guarantee unit rates (fixed for two years from 1 October 2022)
If you’re on a fixed tariff priced between £2,500 and £3,550 per year at typical consumption:
You will receive unit price reductions of up to 17p/kWh for electricity and 4.2p/kWh for gas to bring your prices back down to £2,500 at typical consumption
If you’re on a fixed tariff priced above £3,550 per year at typical consumption:
You will receive a full discount of 17p for electricity and 4.2p for gas. However, given the higher starting point, your fixed rate tariff will still have a unit rate that is above the Energy Price Guarantee unit rates.
I am on a pre-payment meter
The Energy Price Guarantee will be automatically applied to your energy unit rates, which will mean that the money on the meter will last longer than otherwise would have been the case this winter.
I am not connected to the grid
If you for whatever reason such as you live in a park home or on a heat network and you are not connected to the grid, you will get support via the Energy Bill Relief Scheme. This will be given to the business that has the relationship with the supplier and this will be passed on to you by law.
You do not need to do anything to receive this support.
I use only electricity
If you are only connected to the electricity network but use fuels other than gas for heating you will still receive the Energy Price Guarantee support for your electricity costs.
However, some households may not be eligible for heating cost support through the scheme- for example, if you are located in an area that isn’t served by the gas grid. If this is the case, you will receive an additional payment of £100 to compensate for the rising costs of other fuels such as heating or oil.
You do not need to do anything to receive this support.
What if I am renting?
If you are renting and are responsible for your own energy consumption and payment you will benefit automatically from the Energy Price Guarantee.
If your landlord is responsible for energy contracts, they should pass on the discount regardless of how tenants pay for their energy usage – this will be enforced via legislation.
What can I do to save money during this energy crisis?
There are many different things that you can do. Here are my top 5 recommendations:
Use less energy
Switch off any unused appliances and lights when not in use.
Check your subscriptions
Are you paying for services you do not use for example Netflix, Apple Music etc?
Change your other service providers
Many energy companies are not taking customers on so think about changing providers such as your broadband
Spare your change
Create a contingency fund to support you during difficult times. The best way, round up your card spending to a savings pot
Can you walk or take public transport?
If you can walk to work or a place of education then ditch the car. Try and walk or take public transport.
It’s good for you and the environment