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The Guardian - UK
The Guardian - UK
Business
Rupert Jones and Alex Lawson

What Jeremy Hunt’s U-turn on energy bills support means for you

Smart meter with budget exceeded warning
Gas and electricity bills had been subsidised through the energy price guarantee and that support will continue until the end of June. Photograph: Just Jus/Alamy

Jeremy Hunt has confirmed a widely trailed U-turn on his plan announced last autumn to make the government’s energy support for households less generous.

The Treasury has subsidised gas and electricity bills for every household through the energy price guarantee (EPG) since October. On Wednesday morning the Treasury revealed that support would continue at its current level for another three months. So what might that decision mean for you?

So I was going to be paying more but now I’m not?

That’s right. Hunt’s widely anticipated U-turn means typical bills will not increase by 20% next month, as had originally been planned. The EPG limits average annual costs to £2,500 but it was due to become less generous.

Under the original plan, that £2,500 ceiling was going to be upped to £3,000 a year from 1 April. But the chancellor has confirmed it will now stay at £2,500 a year until the end of June.

What prompted Hunt’s rethink?

Charities, campaigners and others had urged the government not to reduce the help given to households with paying their energy bills, arguing it would push more Britons into poverty. There had been claims that, without intervention, the number of fuel-poor households would increase from 6.7 million to 8.4 million from April.

Campaigners had demanded that the £2,500 ceiling on the average dual bill be kept in place until the end of June, by which time sharp falls in wholesale gas prices are expected to have fed through the system and should benefit consumers.

Ofgem operates an energy price cap that sets market prices but the EPG keeps bills lower by paying suppliers the difference between that level and the £2,500 ceiling.

Analysts have predicted that the Ofgem cap will fall to just above £2,100 a year from 1 July until the end of this year. It’s a lot higher than that now: £4,279 a year for the period from 1 January to 31 March, and £3,280 a year for 1 April to 30 June.

A hand turning down the radiator control valve to conserve energy
Charities and campaigners had urged the government not to reduce the financial help given to households for energy bills. Photograph: Clive Sherlock/Alamy

Assuming that wholesale prices do not rise sharply again, the EPG would in effect become irrelevant from 1 July, and consumers would go back to paying the lower Ofgem price cap.

MoneySavingExpert’s Martin Lewis had argued there was no point allowing prices to rise for three months only for them to fall again in July, and that it would be far better to just extend the guarantee. Otherwise, he said, people would be unnecessarily subjected to “the financial and mental health damage” of a 20% rise for three months.

So £2,500 a year is what I’ll pay?

Not necessarily – officials say the average household in Great Britain will pay about £2,500 a year on their energy bill until the end of June. However, this is based on a home with “typical” consumption on a dual electricity and gas bill paying by direct debit.

The actual amount someone pays will depend on things such as how much energy they use, where they live and how they pay for energy. So total bills will still rise or fall in line with their energy use.

Will I hear from my energy supplier?

Gas flames on a cooker rings.
Officials say the average household in Great Britain will pay about £2,500 a year on their energy bill until the end of June. Photograph: David J Green/Alamy

Suppliers are obliged to give consumers notice of any changes to prices used to calculate their bills. Although the EPG is not now going to become less generous, energy suppliers plan to write to consumers to notify them of the new rates per unit of gas and electricity calculated under the Ofgem price cap that kicks in from the start of April. Some firms plan to remind consumers on direct debits that they do not need to take action to claim the government support.

What other help has the government offered?

People’s bills have been reduced by the £400 energy bills support scheme. This gave all households a discount of up to £67 a month off their energy bills between October 2022 and March 2023 inclusive, adding up to £400. However, that scheme ends this month.

Aside from that, the government has announced a £900 cash boost for more than 8 million eligible means-tested benefits claimants, including people on universal credit, pension credit and tax credits, paid into bank accounts in three instalments between this spring and spring 2024. There will also be a separate £150 for more than 6 million disabled people, due to be paid in the summer, and £300 for more than 8 million pensioners during winter 2023-24.

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