Chancellor Rishi Sunak will announce support to ease the pressure on millions of households facing soaring energy bills.
Ofgem is expected to announce on Thursday, February 3 that the energy price cap is to rise by 50% because of soaring wholesale gas prices, meaning the average bill could hit £1,915.
According to the Times, Mr Sunak will commit to giving households in council tax bands A to C rebates funded by Government grants under targeted measures for poorer households.
The Treasury did not rule out the move nor did it deny that the Chancellor could announce state-backed loans to give all homes a discount on their energy bills of £200.
Boris Johnson is under vast pressure to ease the cost-of-living crisis, with his leadership under threat over No 10 parties, but the new support is unlikely to be enough to prevent energy bills rising significantly for most people.
What is the energy price cap?
The price cap limits the rates a supplier can charge for their default tariffs. These include the standing charge and price for each kWh of electricity and gas (the units your bill is calculated from).
Ofgem sets the cap level for summer and winter based on the underlying costs to supply energy. This keeps prices fair ensuring costs passed on to consumers in the price you pay reflect legitimate costs suppliers have to supply energy. It also makes sure suppliers reflect any drops in costs in your rates.
The energy price cap is backstop protection from the government, calculated by Ofgem.
It applies if you’re on a default energy tariff, whether you pay by direct debit, standard credit or a prepayment meter.
If your supplier has stopped trading and you are switched to a new supplier you are likely on a price capped tariff.
It won’t apply if you:
- are on a fixed-term energy tariff
- have chosen a standard variable green energy tariff Ofgem has exempted from the cap.
You can contact your supplier to see if you are on their default tariff.
The price cap won’t limit your total bill if you are on a default tariff.
The cap level we set depends on costs in the energy market. So your bills could go down or up.
Different factors also affect how much suppliers change their prices (the rate they charge you) to meet the cap:
- where you live
- how you pay (prepayment, direct debit or standard credit)
- your type of energy meter.
Your energy usage will affect your total bill too.
Your supplier must automatically apply the price cap Ofgem sets if you are on a default tariff.
Ofgem says global rises in gas prices mean this is a very challenging time in the energy market. Right now this may mean you find few better value tariffs than being on a supplier’s default rate capped by the government’s energy price cap. But it’s always worth signing up to alerts and keeping up to date on market changes and your energy use. That way you can be confident you’re getting the best price possible and saving energy where you can.
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