Energy prices are set to rise for millions of people this week as the new energy price guarantee comes into effect. The price guarantee, announced earlier this month by the UK Government in a bid to tackle the cost of living crisis, will see the typical household's energy bill capped at £2,500 per year – or around £208 per month – for two years starting from October 1.
The new guarantee effectively replaces the price cap, which was set to rise to £3,549 from the start of October and would have plunged millions of people towards fuel poverty, but it means households will still be paying around 95% more on their energy bills this winter than last year.
With this being the last week before the new tariffs come into effect here is everything you need to know about the upcoming changes including when you should take a meter reading, how it affects you, and how much you'll actually pay.
Read more: Six DWP benefits and money changes that are due this week
How much will the new energy rates be?
Although the price guarantee is capped at £2,500 per year it does not mean every household will pay less than this. The new price guarantee will work similarly to the old price cap, which had been set every six months by energy regulator Ofgem. The energy price cap limits the maximum amount suppliers can charge for each unit of gas and electricity you use and sets a maximum daily standing charge (what you pay to have your home connected to the grid). So the word 'cap' refers to the price of each unit of energy and not the total price for a household as there is no upper limit on what customers pay. The more energy you use the more you pay and vice versa.
The figure that is quoted as the price cap is based on the average amount of gas and electricity used by homes in the UK. So the average home will pay £2,500 over the course of a year. Bills will be reduced by the previously-announced £400 rebate on bills. But if you have a larger home, a less-well-insulated home, or use energy-intensive equipment at home then you could still be paying significantly more.
According to MoneySavingExpert these are the average dual-fuel direct debit rates for the new energy price guarantee from October 1, how it compares to now, and what was due to happen under the old price cap.
- Electricity:
Unit rate: 34.0p/kWh (currently 28.3p, was due to be 51.89p)
Standing charge: 46.4p/day (currently 45.3p, was due to be 46.4p)
- Gas:
Unit rate: 10.3p/kWh (currently 7.4p, was due to be 14.76p)
Standing charge: 28.5p/day (currently 27.2p, was due to be 28.5p)
The cap also varies by region and you can find out the exact rates depending on where you live here.
Do I need to take a meter reading this week?
Last March saw millions of people rush to submit meter readings the day before the new price cap came in leading to panic after the energy companies' websites and phone lines crashed. To avoid this it is worth remembering that you can submit a reading a few days before or after without a massive difference in what you'll pay. You can even take a picture of your reading and submit it on a separate day as most companies allow you to backdate it.
If you're on a prepayment or smart meter you don't have to submit a reading although it is recommended that you take a picture of yours just in case. With some prepayment meters you might even be able to stay on the old rates a bit longer as you get the rate when you top up and it lasts until you top up again. So if you have some spare money you can top up now and keep the current price beyond October 1 until you need to top up again. This will not work for gas meters or smart electrical meters.
What happens to my bills if I'm on a fixed rate?
More than three quarters of energy customers in the UK are on some form of capped tariff but if you are on a fixed rate you should also benefit from the price guarantee. The UK Government has confirmed that fixed-tariff customers will have the same level of reductions as those on standard tariffs. It said: "A ‘floor’ unit price for gas averaging at 10.3p/kWh and for electricity averaging at 34p/kWh for direct debit customers will be introduced 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.
"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."
Energy suppliers will adjust fixed tariffs automatically and customers on fixed tariffs do not need to take any action to get the benefits of this scheme. You may have been contacted by your company advising you that you can change to its standard tariff without paying any exit fee – this applies until at least mid-November and in some cases beyond that – but it's worth checking whether or not this will save you money before making any decision.
I'm on an alternative system for heating – will I receive any support?
Yes. After renewed calls to announce support for those on non-mains gas systems the UK Government has confirmed details of its support for people in caravan parks, on ‘shared heat networks’ in blocks of flats, who live off-grid, those who rely on heating oil instead of gas, and those who pay ‘all-in’ to a landlord. Some of these groups do not qualify for the £400 off energy bills.
The government said last week that it would introduce a law to make sure landlords pass on the £400 discount “to tenants who pay all-inclusive bills”. Additional funding will be made available so that £400 payments will be extended to include park home residents and those whose landlords pay for their energy via a commercial contract. It has not yet been confirmed how these £400 payments will work in practice. A payment of £100 will be given to those who aren't connected to the gas grid and use LPG or heating oils but it's also not been confirmed how this will be distributed. This will be in addition to the £400 payment, which people who have oil central heating do qualify for. You can find out more about support if you're on an alternative system here.
I am struggling to pay my bills – what support is available?
There is support available if you're struggling to pay bills. All households are getting £400 off their bills in six instalments between October and March although how you receive it will depend on how you pay your bills and what company you are with. Read more about how you'll get your £400 off bills here. The Welsh Government has also opened applications this week for its fuel support scheme offering £200 off energy bills to those on certain benefits. You can find out more about that here.
A number of the main energy companies also have hardship funds, grants, or other schemes available for those who are struggling to pay bills. It's best to speak to your company directly about this. You can find out more here. To read about all the financial support available between now and Christmas in Wales click here.
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