Martin Lewis has explained what the government's latest energy bill announcement means for households on fixed tariffs. The Energy Price Guarantee, which was unveiled as part of Kwasi Kwarteng's mini-budget in September, ensured that a typical household's energy bill would be frozen at around £2,500 a year.
The guarantee came into force in October and was due to last for two years. But on Monday (October 17) Jeremy Hunt announced that the policy would only last until April.
The newly-appointed Chancellor said there would be a review to look at a “new approach” to target support at those worst off after April and that the new package would “cost the taxpayer significantly less”. Following the announcement, the MoneySavingExpert took to Twitter to share his 'best guess' on what the shake-up means for households on fixed energy bill tariffs.
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Mr Lewis explained: "What does the energy price guarantee's early end mean for those on fixed tariffs? This is my best-guess based on what we know so far. It depends on which of three camps you're in... 1. You're on a fix below the guarantee. Nowt has changed. Your fix will remain for full term.
"2. Your fix was higher than the guarantee rate, but was reduced by up to 4p/kWh gas, 14p/kWh elec which drops you to the price guarantee rate. It's likely this reduction ends in April. Some firms moved people in this position to standard tariffs, no idea legal position on that yet.
"3. Your fix was reduced by the 4p/kWh gas, 14p/kWh elec yet that still left you higher than the guarantee rate. You can switch penalty free til Nov to you provider's price guarantee tariff. Its still likely worth doing it as, energy prices dropped, but I need do more analysis."
The Energy Price Guarantee replaced the energy price cap which regulates the amount that 24 million households pay for their gas and electricity. Regulator Ofgem had announced the price cap was to increase once again in October by around 80%.
It would have meant the average household would be forking out £3,549 per year for their bills - the highest the price cap has ever been. The guarantee was ushered in try and ease the burden of rising costs.
On Monday during his televised fiscal statement, Mr Hunt explained: "The biggest single expense in the growth plan was the energy price guarantee. This is a landmark policy supporting millions of people through a difficult winter and today I want to confirm that the support we are providing between now and April next year will not change.
"But beyond that, the Prime Minister and I have agreed it would not be responsible to continue exposing public finances to unlimited volatility in international gas prices. So I’m announcing today a Treasury-led review into how we support energy bills beyond April next year. The objective is to design a new approach that will cost the taxpayer significantly less than planned whilst ensuring enough support for those in need.
“Any support for businesses will be targeted to those most affected and the new approach will better incentivise energy efficiency.”
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