Energy bills will rise for millions households from tomorrow as the £2,500 Energy Price Guarantee comes into effect.
The new Government initiative replaces the Ofgem price cap - which would’ve seen bills rise to £3,549 for someone with typical use - and will be in place for two years.
It means households won’t face the hideous rises that were expected to come next year - with analysts previously predicting that gas and electricity bills will hit £6,000 in 2023.
But the £2,500 figure that kicks in from this Saturday (October 1) is still higher than the current price cap, which is £1,971.
Here is everything you need to know about the Energy Price Guarantee.
Is £2,500 the maximum I’ll pay?
No - there is no actual cap on your energy bills. The £2,500 figure is just used to illustrate what someone with typical energy use will pay per year.
Much like the old Ofgem price cap, what the Energy Price Guarantee will do is cap the unit rates you’re charged for gas and electricity, plus the standing charges.
This means if you use more energy, you could end up paying more than £2,500. Similarly, use less energy and your bill should be less.
What are the unit rates?
The average unit rates for dual-fuel customers paying by direct debit are:
Electricity
Unit rate: 34.04p per kWh
Standing charge: 46.36p per day
Gas
Unit rate: 10.33p per kWh
Standing charge: 28.49p per day
If you don't pay by direct debit, the unit rates are:
Electricity
Unit rate: 36.80p per kWh
Standing charge: 52.40p per day
Gas
Unit rate: 11.12p per kWh
Standing charge: 33.54p per day
The average unit rates for prepayment customers are:
Electricity
Unit rate: 33.08p per kWh
Standing charge: 51.41p per day
Gas
Unit rate: 10.63p per kWh
Standing charge: 37.51p per day
A kilowatt hour (kWh) is a measure of how much energy you're using per hour.
I'm on a fixed deal - will my bill go down?
It all depends. Most households on a fixed energy deal will see the same unit rate reduction applied to their bills as the Energy Price Guarantee - unless they locked into a very cheap deal.
The discount is 4p/kWh for gas, and 17p/kWh for electricity. The reduction will only apply to fixes that will be more expensive than the Energy Price Guarantee.
For someone who fixed into a really expensive energy deal, you may find your bill still ends up higher than the Energy Price Guarantee even with the discount.
If your fix will be more expensive, Martin Lewis has confirmed that most energy firms - British Gas, Ovo (SSE), Octopus, EDF, E.on, Shell and Scottish Power - will allow customers to move with no early exit penalties.
This should apply until at least November 15 although some will allow you to switch beyond this - be sure to check.
If you'll pay less than the Energy Price Guarantee, then the discount won't be applied to your fix.
Or if you picked a medium-level fix, then your bill should be lowered to match the new Energy Price Guarantee.
Will I still get the £400 energy discount?
The £400 energy discount is still happening and is on top of the £2,500 figure - so this takes the average bill for someone with typical use to £2,100 a year.
You should start to get the rebate from October, spread out over six months - you'll get £66 off your bill in October and November, then £67 from December 2022 to March 2023.
There are no plans currently to extend this.
Direct debit customers will receive the discount automatically - either as a deduction to your monthly direct debit, or as a refund to your bank account.
If you pay on receipt of your bill, the discount will come as a credit to your energy account each month.
Smart prepayment meter customers will also receive the discount automatically each month.
If you're a prepay customer, you will be sent discount vouchers by text, email or post - you'll then need to manually redeem these.
What about people in park homes - and renters paying 'all-in'?
People in caravan parks or on "shared heat networks" in flats will be given a £400 one-off payment, if they weren’t eligible for the £400 discount already.
Park home residents typically pay for their electricity directly to the park owner, sparking fears that some people would miss out on the support.
People who live off the gas grid, relying on heating oil, will also get an extra £100 one-off payment on top of the £400 electricity bills discount.
There will also be legislation to ensure landlords pass on the £400 discount to tenants who pay their electricity as part of an "all included" rent package.
What energy bill help is there?
Of course, the simplest way to lower your energy bill is to use less energy - and simple things like making sure electronics aren't left on standby can really add up.
If you can't pay your bill, talk to your energy provider as soon as possible. They should be able to offer you tailored support.
All the big energy firms also have charitable hardship funds and grants that you may be eligible for if you’re struggling.
For example, the British Gas Energy Trust can be accessed by anyone - not just its customers - providing you meet the eligibility criteria.
The Warm Home Discount scheme, which is a one-off payment of £150 distributed by energy suppliers, will open again this winter for vulnerable and low income households.
If you’re over the state pension age, you may be eligible for the Winter Fuel Payment scheme, worth between £100 and £300 during the winter months.
You should also keep an eye out for cost of living payments. Those in receipt of certain means-tested benefits are getting £650, while there is also a £150 disability payment and £300 for pensioners who get Winter Fuel Payments.
For specific energy debt help, speak to:
