The Department for Business, Energy and Industrial Strategy has released more information about the £200 energy bill ‘loan’ that will be added to more than 28 million electricity accounts across the UK in October.
Ofgem’s energy price cap came into force on April 1, pushing annual consumption on typical, standard tariffs up by £693 to £1,971 per year, while homes on pre-payment meters will see an increase of £708 to £2,017.
The UK Government explains that energy bills are rising because it is more expensive for the companies who supply our energy to buy oil, coal, and gas - over the last year, the price of gas alone has quadrupled.
The reasons gas prices are soaring are global - both in global demand for energy from a long cold winter last year and increased demands during the coronavirus pandemic.
In October, £200 will be credited to every electricity account to help offset the increase in bills. It is not optional and will be repaid over five years starting in April 2023.
However, a petition calling for consumers to be given ‘the right to refuse’ the £200 energy levy - it’s not a loan - has received more than 10,000 signatures of support, which means it has passed the threshold to trigger an official response from the UKGovernment.
The UK Government will also be launching a consultation soon seeking views from all areas of society about how best to implement this scheme.
Below is everything you need to know about the £200 energy loan, full details can be found on the GOV.UK website here.
What is the Energy Bills Support Scheme?
The UK Government is providing a package of support worth £9.1 billion in 2022 to 2023 which includes the Energy Bills Support Scheme.
Through the scheme, domestic electricity customers in the UK will receive a £200 reduction in their electricity costs from this October.
The guidance on GOV.UK states: “It’s fair to spread the costs of the reduction as widely as possible, so that no-one pays more than £40 per year through the levy. Therefore, all domestic electricity consumers will pay a charge in future years.”
Will I be eligible for the Energy Bills Support Scheme?
All households with a domestic electricity connection will be automatically eligible for the £200 bill reduction.
Do I need to apply for the £200 support scheme?
No. The UK Government expects electricity suppliers to apply the reduction automatically to bills from October 2022.
It said: “We are working hard to design the delivery of this and there may be some variations in how you actually receive the benefit, depending on how you pay for your energy, for example whether you pay by Direct Debit or are on a pre-payment meter.
“However, if you have a domestic electricity meter you should receive the £200 reduction.”
Is the £200 a loan?
No - it is not a loan, it’s more of a levy on your energy bill.
The UK Government states: “The energy bill reduction is not a loan. There will be no interest due, no debt attached, and it will not affect your credit rating. It is a grant now with a levy on future bill payers.
“The [UK] Government is taking action to spread the impact of increases in global gas prices in a way that is more manageable for households.”
It goes on to explain that this is a “universal measure to help households smooth out the increased costs of energy bills at a time when they are particularly high”.
It added: “The reduction in costs will help people with the increase in energy bills now by spreading some of the costs over a few years, so they are more manageable for households.”
When will more clarity on the design and delivery of the £200 credit be available?
The UK Government explained: “We are working on the specifics of delivery and are actively engaging with energy suppliers, consumer groups and Ofgem to ensure that delivering this reduction and levy are as simple and efficient as possible.”
It added that a consultation will launch shortly to seek views from all areas of society about how best to implement this scheme.
Is the scheme UK-wide?
The payment through energy bills will apply across Scotland, England and Wales. Energy policy is devolved in Northern Ireland.
The Northern Ireland Executive will be funded to provide comparable support with around £150 million through the Barnett formula in the financial year 2022 to 2023.
I am on a non-smart pre-payment meter, will I get the £200?
Yes. Previous schemes have used vouchers to reach those on pre-payment meters and the UK Government says it will ensure that households whose energy is managed in this way will get the reduction.
If I live in a park home, will I get the £200? Or if I pay for energy in my rent, how do I make sure my landlord passes on the reduction?
The UK Government said: “We recognise that there are certain situations where a third party will be responsible for the bill (and be named on it). In these situations, any charges are then passed onto the end user, typically through all-inclusive rent (landlord or tenant) or ‘pitch’ charges (for example park homes).”
I don’t need the £200, can I opt-out?
No. All households with a domestic electricity connection will be automatically eligible for the £200 reduction.
Guidance states: “In line with our high-level principles, we want to design a scheme that is simple to deliver while maximising the reach of the scheme and ensuring that additional costs are minimised.”
What if I change payment method or tariff, or if my energy supplier goes bust?
“We are still designing the scheme but will ensure that customers who switch payment methods or whose energy suppliers fail, will not be penalised,” explains the guidance.
What if I move house or switch supplier?
All suppliers will be applying the reduction to bills from October 2022.
Costs will then be recouped from 2023 over five years. The scheme will be based on electricity meter points, so it won’t matter if you switch supplier.
Why does the support not fully cover the increased cost of the energy price cap?
This scheme is expected to help over 28 million households, spreading the increased costs of global energy prices over time in a way that is more manageable for households.
This £200 energy bill reduction is in addition to a non-repayable £150 Council Tax rebate for those in bands A to D, or households in Scotland currently receiving a Reduction on their annual bill.
The UK Government explained: “This means that the majority of households will receive £350 in total, protecting from half of the average forecast bill rise.”
The UK Government is spending £22 billion over 2022 t0 2023 to help families with the cost of living.
This includes reducing the Universal Credit taper rate, cutting fuel duty and raising the National Living Wage, but National Insurance Contributions are rising this month, which means workers across the UK will have less in their take-home pay.
The next Ofgem review will be implemented on October 1 and could see energy bills increase even further.
Emma Pinchbeck, chief executive of Energy UK, said the average household may be forced to pay between £2,500 and £3,000 per year for their supplies.
However, the predictions are still very early and based on the most recent data, so they are likely to change before the October price cap is announced this summer.
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