Prime Minister Liz Truss announced plans to tackle the energy crisis today, Thursday, September 8, 2022. The headline news was that energy bills will be capped at £2,500 for two years.
While the much anticipated news was welcomed by bill payers faced the uncertainty about looming fuel costs, what exactly does the news mean to households? Will the money need to be paid back and if so how?
It didn't take long following the announcement for consumer champion Martin Lewis to offer his advice on the measures for tackling the energy crisis.
In brief, the PM announced that the Ofgem price cap would be replaced with a “two-year energy price guarantee”. That means that energy bills will be frozen at £2,500 for two years. In addition to this, the previously announced £400 fuel discount will remain in place with the discount being made in six instalments throughout the winter period starting from October. A bill reduction of £66 will be applied to energy bills in October and November, rising to £67 each month from December through to March 2023.
READ MORE: Live updates as Liz Truss announces £2,500 freeze on energy bills in 'two year guarantee'
Currently, the Ofgem price cap is £1,971 for someone on a default tariff who pays by direct debit. Liz Truss says that the new price freeze measures would save the average household £1,000 a year on the previously planned price cap rose to £3,549.
Under the new scheme, a typical UK household will pay no more than £2,500 a year on bills for two years from October 1. This includes the removal of green levies, which add about £150 a year to your bills, for two years..
Summarising what this means for British households, Money Saving Expert founder Martin Lewis listed the 15 key takeaways from the PM's plan, which he posted on social media.
Mr Lewis explained how the current price cap is at £1,971 for standard use and was set to soar to £3,549 in October. Explaining that there will be a cap on standing charges and unit rates, but there is not a total cap on what you pay.
He said the new lower cap includes getting rid of green levies. The Mirror reported that he said from today's announcement, the £400 going to each household will continue, and with the energy cap at £2,500 it will bring costs down to £2,100.
In an attempt to address the cost of living crisis, the new Tory leader is expected to borrow around £150billion - after rejecting a windfall tax on the excess profits of oil and gas giants
Martin Lewis appeared on the BBC Radio 4 Today Programme this morning to highlight those who are not covered by the Ofgem price cap. For example, the price cap doesn’t apply to people in Northern Ireland, or those who use heating oil.
Renters could also fall under the cracks, if they pay their energy directly to their landlord, and people in park homes are also not normally in charge of their gas and electricity bills.
The Government has yet to announce full details of the energy help to come, so it isn't clear just yet what it will mean for every household. “This helps every household in England, Scotland and Wales who pays a gas and electricity bill,” said Martin. "Those who have LPG or heating oil - many in rural areas and have seen substantial rises - are not covered by the price cap.
“We also need to make sure the benefits of this policy go to those who pay landlords for energy bills, students who’ve been locked into high prices in anticipation of these rises - because these are people who pay their landlord directly, not an energy company. Those with communal heating contracts, those living in park homes.”
He added: “There is a big question about those, who - understandable - have chosen to fix their bills, often at higher levels than the price cap to forestall future rises. People have made a legitimate choice to fix their bills. What I would call for as a bare minimum is, anyone on a fix should be allowed by every energy company to switch to the state subsidised energy tariff without any exit penalties.”
The new measures will be funded by extra public borrowing - piling the cost onto taxpayers eventually. The price cap sets a limit on the rates a supplier can charge for each unit of gas and electricity you use, as well as the daily standing charge. It currently covers around 24 million households.
READ MORE:
Energy bills capped at £2,500 for two years, Liz Truss confirms
Live: Tour of Britain cyclists arrive in Nottinghamshire as crowds turn out to watch
DWP PIP guide outlines requirements for in-person, phone or video call assessments
10 energy myths busted - from smart meters to leaving the heating on low all day
