Energy bills – typical households could save £1000 under new guarantee
Energy bills: Martin Lewis discusses standing charges
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Ms Truss announced the plan earlier this month after the energy regulator Ofgem announced that its energy price cap would increase to £3,549 from October. This was an increase of 80 percent for average households from the previous cap level of £1,971 from April. The price cap last winter was £1,277 a year. The Government had faced calls for months that the increase would place severe financial pressure on UK households and that they needed to step in.
Ms Truss’s “Energy Price Guarantee” will commence from October 1 this year and will last for two years.
She also stated that the freeze would help typical households save around £1,000 on the cost of their energy bills.
The Energy Price Guarantee is a limit to the amount households can be charged per unit of gas and electricity. People can still spend more than £2,500 if they consume more energy than typical use.
For households in England, Scotland and Wales who pay for their energy through monthly, quarterly or other regular bills, the guarantee will be applied automatically when their bill is calculated.
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This means that there is no need for customers to do anything or speak to anyone to ensure they benefit from the price freeze.
According to MoneySavingExpert.com, the “average unit rate for duel-fuel” customers paying by direct debit is 34.00p per kWh for electricity and 10.30p per kWh for gas.
However, the website warns that exact unit rates vary depending on where a person lives.
It is important to remember that it is a cap on the unit rate, and not the final bill and people could face higher bills the more energy they use.
More details about the plan are to come in the coming few weeks, with a Mini-Budget expected to be announced this Friday by Chancellor Kwasi Kwarteng.
Ms Truss also announced that prices of gas and electricity will be capped for businesses, charities and the public sector for the next six months from October.
She also stated that there would be support for specific sectors beyond next March to be announced in the coming three months.
From a regulatory point of view, the price comparison website Uswitch stated in an article that Liz Truss’s Energy Price Guarantee “should provide time” to fix the longer-standing energy industry issues that have led to the current position the UK is in.
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However, Uswitch warned that while the price of wholesale gas may fall, prices for customers will remain frozen at £2,500 and it “remains to be seen” as to whether customers’ prices are brought down as well.
The price comparison site also noted that the “main risk” associated with the freeze is the way that it will be paid as “at the moment, we don’t know whether the costs will eventually be paid by customers, even if takes years”.
Details of this have yet to be released however are expected to be announced in Mr Kwarteng’s budget this week.
The Prime Minister has also confirmed that the Energy Price Guarantee will run alongside the previously announced £400 energy bill discount.
As announced by the Government earlier this year, every household will receive £400 off their energy bills from October.
The discount will be administered by the energy suppliers and a discount of £66 will be applied to their energy bills in October and November.
This discount will rise to £67 each month from December through to March next year.
The Government confirmed earlier this year that the discount is non-repayable and will be provided on a monthly basis.
This is regardless of whether a consumer pays monthly, quarterly or has an associated payment card.
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