Energy bills across the UK will rise again from today as the government's £2,500 Energy Price Guarantee takes effect.
Liz Truss' new initiative will replace the Ofgem price cap, which was predicted to see bills rise as high as £3,549 a year for the average UK household. Regardless of the government's new price freeze, bills will still be much higher than they were last winter.
The price freeze will be in place for two years and means that average-use households will pay around £2,500 a year on their gas and electricity. However, actual bills will be higher or lower depending on the level of use. The government will also be bringing in the first instalment of the £400 Energy Bill Support Scheme in October, with payments set to carry on throughout winter.
Read more: Three things households should do before energy prices are hiked again
Prime Minister Liz Truss said: "I know people across the country are anxious about their energy bills, which is why we have acted quickly to help them. Livelihoods and businesses were at stake. The government’s energy support limits the price they pay for gas and electricity, shields them from massive bill increases, and is expected to curb inflation too.
“The cost of not acting would have been enormous. To make sure the British public is not left in this position again, we are also fixing the problem at its source by scaling up home-grown energy and reducing reliance on foreign supplies to boost our energy security and independence.”
Here's a breakdown of how your bills will change from today.
What are the new unit rates and standing charges under the price guarantee?
The price guarantee puts a cap on how much energy companies can charge per unit of electricity and gas. Energy bills are then worked out based on how much energy a household uses. There is also a standing charge per day, which is the cost of being hooked up to the grid.
According to Ofgem, a typical household uses 2,900kWh of electricity and 12,000kWh of gas in a year. So those are figures that have been used to work out the £2,500 freeze price.
The price guarantee affects anyone who is on a standard variable tariff, who pays by direct debit, credit, or prepaid meter. The cost of energy per unit based on the new price guarantee, as reported by the Mirror, is outlined below.
For customers who pay their bills via direct debit:
- Unit rate for electricity: 34p per kWh (up from 28p)
- Unit rate for gas: 10.3p per kWh (up from 7p)
- Standing charge for electricity: 46p per day (up from 45p)
- Standing charge for gas: 28p per day (up from 27p)
For customers who don't pay by direct debit:
- Unit rate for electricity: 37p per kWh
- Unit rate for gas: 11.1p per kWh
- Standing charge for electricity: 52p per day
- Standing charge for gas: 34p per day
For prepayment customers:
- Unit rate for electricity: 33p per kWh
- Unit rate for gas: 10.6p per kWh
- Standing charge for electricity: 51p per day
- Standing charge for gas: 38p per day
Will my bills change if I am on a fixed tariff?
Fixed tariffs are agreed upon annually and fix the price per unit for the whole of the year.
Unless you're already on a much cheaper deal, you will see the same unit rate reduction applied to your bill as customers on standard tariffs. The discount is 4p/kWh for gas, and 17p/kWh for electricity.
The reduction will only apply to fixes that are more expensive than the energy price guarantee. If you're on a more expensive deal, then you may find your bill rising even higher than before. However, if your find that your fix will be far more expensive, then most energy firms are offering early exits with no fees.
So bills won't be capped at £2,500?
No - despite often being referred to as a cap, the energy price guarantee will not place a maximum limit on what you pay. The £2,500 figure is what an average household would pay. If you use less energy than average you will pay less and if you use more energy than average you will pay more.
How much can households expect to pay annually?
Energy usage will depend on how many people live in the house, what time of day they use the most energy, and how energy efficient their home is. To give you more of an idea of how much your annual bill will be, the government has set out how much different households are expected to pay based on average usage.
If you live in a purpose-built flat your average bill will is expected to be £1,750. If you live in a mid-terraced house it will be around £2,350. Those who live in semi-detached houses will pay around £2,650 a year, while households in detached properties will pay roughly £3,300 annually.
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