An £200 energy rebate or 'loan-not-loan' (term coined by Martin Lewis) will be issued later this year.
With energy prices soaring, April brings with it a record breaking increase.
Energy regulator Ofgem confirmed that from April 1, the price cap will rise 54 per cent, adding an extra £693 to the average household bill and a whopping £708 to those on prepayment meters.
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Bill payers have been warned the average energy bill will be closer to £2,000 at at £1,971 per year.
The price cap sets a limit to how much energy firms can charge their gas and electric rates, but as financial guru Martin Lewis says, there is no limit on how much bills can be. If you use more energy, you will have a higher bill compared to those who don't.
The UK Government was under pressure to intervene and provide support as experts gave a stark warning that the country was heading into a cost of living crisis.
The Bank of England predicts the rate of inflation will rise over seven per cent, pushing up food prices and fuel prices are already reach record highs.
Along with that, energy costs will leave thousands concerned about how to make ends meet. Chancellor Rishi Sunak confirmed that an energy rebate will be issued in October to everyone.
This will be a one off payment of £200 to energy companies and then they can deduct bills - but will be paid back over five years.
People do not have a choice on this and cannot opt out, although Martin Lewis' Money Saving Expert conducted a survey and found that 57 of people surveyed would decline the offer if they have the chance.
The wording of it is important - as it has been highlighted by the financial journalist that it is not connected to an individual or household or building and so cannot strictly be called a loan.
Here's how the £200 energy rebate will work
In October, every electric bill will be reduced by £200.
If you pay direct debit, the £200 will be taken off automatically. If you use a pre-payment meter, you can get the money via their smart meter, voucher, cheque or something similar.
Of course, the effect of the rebate will depend on how much energy you use. Those who live in a small flat with just one or two people will be paying less than a family of four.
Then from April 2023, they payback begins. Every electric bill will have a £40 added each year and this will run for five years to pay back the discount.
So for those in smaller properties, this will have a bigger impact than those with larger bills.
There was a lot of confusion as to what would happen if you move out and the living situation changes.
As said above, this is not tied to individuals, this is tied to bills.
For example if you move in with your partner after October 2022 and after your original energy bill was reduced by £200, you will only have one bill to pay together. Your energy bill doesn't move with you.
However, if you then move out on your own to a different home by April 2023, you will automatically have the extra £40 added to your yearly bill. It won't be halved because you no longer live with someone.
What do you think of the energy rebate? Let us know in the comments?
