The government has set out decisive action to support people and businesses with their energy bills and tackle the root causes of the issues in the UK energy market through increased supply – ensuring the country is not left in the same position again.

Support for households

The government has announced the following immediate, short-term action to support households. For the most part, this will operate in the same way for households across the whole of the UK, but there are a few differences for those in Northern Ireland because of the different way the energy market operates. Where there are differences, the overall support provided will be equivalent across the UK, and the differences in how the schemes will work are explained towards the end of this note in the section ‘How the Energy Price Guarantee (EPG) and Energy Bills Support Scheme will be applied to energy bills in Northern Ireland’.

Energy Bills Support Scheme

The Energy Bills Support Scheme provides a £400 non-repayable discount to eligible households to help with their energy bills over winter 2022 to 2023.

Find out more about the Energy Bills Support Scheme.

A new Energy Price Guarantee

The Energy Price Guarantee will reduce the unit cost of electricity and gas so that a typical household in Great Britain will save around £700 this Winter, based on what energy prices would have been under the current price cap – reducing bills by roughly a third. The Energy Price Guarantee will be in place from 1 October 2022 until 31 March 2023. A review will be launched to consider more targeted measures to support households with their energy bills after this period.

The consumer saving will be based on usage. Your actual bill and savings could be higher or lower depending on the size of your home, how well it’s insulated, how many people live there and how much energy you use.

Energy suppliers will be fully compensated by the government for the savings delivered to households.

£150 of this £700 saving will be delivered by temporarily suspending environmental and social costs (including green levies) from being passed onto consumer bills. These costs will be transferred to the government, while customers still benefit from the low-carbon electricity generation. Payment of the Warm Home Discount will be unaffected.

The Energy Price Guarantee is in addition to the £400 Energy Bills Support Scheme, which will be paid, in Great Britain, in 6 monthly instalments from October, meaning a typical household will save around £1,100 this Winter. Households in Northern Ireland will also receive a £400 discount on bills through the Energy Bills Support Scheme.

The most vulnerable UK households will also continue to receive £1,200 of support provided in instalments over the year, through discounts to Council Tax and Cost of Living payments for those in receipt of certain benefits.

Households who are unable to benefit from the full extent of the Energy Bills Support Scheme and/or Energy Price Guarantee scheme (for example, households not on standard gas / electricity contracts) will receive equivalent support. Further detail on this is below.

How the new Energy Price Guarantee will be applied to energy bills in Great Britain

The Energy Price Guarantee limits the amount you can be charged per unit of gas or electricity, so your exact bill amount will continue to be influenced by how much energy you use.

You do not need to apply, and there’s no need to contact your energy supplier.

For consumers in England, Scotland and Wales who pay for their energy through a monthly, quarterly or other regular bill, the Energy Price Guarantee will be applied when your bill is calculated.

In addition: the Energy Bills Support Scheme (£400 discount) will also be applied. In Great Britain, you will automatically receive the Energy Bills Support Scheme as a discount on your monthly bill, totalling £400 from October to March. In Northern Ireland we are working to deliver the £400 discount as soon as possible.

If you’re on a standard variable tariff

The average unit price for dual fuel customers on standard variable tariffs, subject to Ofgem’s price cap, paying by direct debit will be limited to 34.0p/kWh for electricity and 10.3p/kWh for gas, inclusive of VAT, from 1 October.

These are average unit prices, the unit rate itself varies by regions and the full list of rates have been passed to suppliers to ensure that they are used to calculate bills in Great Britain from 1 October. See the full list of regional rates.

Energy suppliers will adjust standard variable tariffs automatically. Customers on standard variable tariffs do not need to take any action to get the benefits of this scheme.

The Energy Bills Support Scheme will also be applied as a discount on your monthly bill, totalling £400 from October to March.

If you’re on a variable tariff not subject to the price cap

Variable tariffs which were not subject to Ofgem’s price cap (which are known as having a derogation), for instance certain 100% renewable energy tariffs, will receive the full unit rate discount: reductions of 17p/kWh for electricity and 4.2p/kWh for gas.

If originally priced at a higher level than Ofgem’s price cap, then the resulting unit rates will be above the standard variable EPG unit rates.

The Energy Bills Support Scheme will also be applied as a discount on your monthly bill, totalling £400 from October to March.

If you’re on a pre-payment meter

For pre-payment meter customers, the government will make sure you receive the full benefit of both the Energy Price Guarantee and the Energy Bills Support Scheme. For the Energy Price Guarantee, you will not need vouchers, but to benefit from the EBSS you may need them.

The Energy Price Guarantee will be applied to the rate you pay for each unit of energy, so the money you put on the meter will last longer than would otherwise have been the case this winter. There’s no need to apply and you won’t need any vouchers. The discount will be applied automatically by your supplier.

As is the case with the price cap, under the Energy Price Guarantee there will continue to be a small difference between the unit cost for a pre-payment meter customer and other bill payers.

If you are on a prepayment meter, you will also receive the £400 Energy Bills Support Scheme. These payments will be made monthly from October to March, totalling £400 overall.

You will receive the Energy Bills Support Scheme discount from the first week of each month. Smart meters will be credited automatically. If you have a traditional prepayment meter you’ll get the discount automatically in one of the following ways, as:

• redeemable vouchers, sent by SMS text, email or post
• an automatic credit when you top up at your usual top up point

Your electricity supplier will let you know in advance how you will get your discount.

Your supplier should have your contact details, but if you’re not sure or you don’t receive any information from them, you should check that they have your latest number and email.

If you get vouchers you’ll need to redeem them at a top-up point. Your supplier will tell you where to redeem them, for example at a Post Office branch or a PayPoint shop.

Payzone outlets are unable to accept the vouchers.

If you’re on a fixed rate tariff

Fixed tariff customers will have the same support where appropriate. Unit price reductions of up to 17p/kWh for electricity and 4.2p/kWh for gas will apply to fixed tariff customers that currently have unit rates above the EPG.

A ‘floor’ unit price for gas averaging at 10.3p/kWh and for electricity averaging at 34p/kWh for direct debit customers will be introduced, because some people will have fixed at much lower prices some time ago, meaning their payments will already be below the level set by the Energy Price Guarantee.

Customers on fixed rate tariffs that are already below the floor unit prices will continue to enjoy those low rates, but will not receive a further discount for the duration of their fixed term.

For the small number of consumers who fixed at a high rate exceeding the October Ofgem price cap of £3,549, they will receive the full discount of 17p for electricity and 4.2p for gas. However, given the higher starting point, their fixed rate tariff will still have a unit rate that is above the EPG rates.

Energy suppliers will adjust fixed tariffs automatically. Customers on fixed tariffs do not need to take any action to get the benefits of this scheme. Any transfer to a different tariff is a matter for suppliers.

The Energy Bills Support Scheme will be paid on top of this as a monthly discount to your bill, totalling £400 from October to March.

Standing charges

Average standing charges for customers on default tariffs will remain capped in line with the levels set (in Great Britain) by Ofgem for the default tariff cap from 1 October, at 46p per day for electricity and 28p per day for gas, for a typical dual fuel customer paying by direct debit. Standing charges for households in Northern Ireland will also be unaffected.

If you’re not connected to the grid

Those households not on standard gas or electricity contracts, such as those living in park homes or on heat networks – and so outside the scheme – will receive support equivalent to both the Energy Price Guarantee and the Energy Bills Support Scheme.

The business which has the direct commercial relationship with the energy supplier (for example the park owner) will receive support via the Energy Bill Relief Scheme and we will act now to introduce legislation so that they have to pass the benefit directly on to residents. Customers do not need to take any action in order to receive this support, which they will receive by the end of the year.

All domestic households will also receive the £400 Energy Bills Support Scheme. We are working through exactly how different groups of consumers will receive this, using the most practical and tested routes available.

If you do not use mains gas for your heating

The Alternative Fuel Payment (AFP) will provide a one-off payment to UK households that use alternative fuels for heating, such as heating oil or LPG, instead of mains gas. This £100 payment will ensure that all households who do not benefit through the Energy Price Guarantee to heat their homes, receive support for the cost of the fuel they do use.

Households eligible for these payments will receive £100 as a credit on their electricity bill this winter. Households who are eligible for but who do not receive AFP or the £100 heat network payment, because they do not have a relationship with an electricity supplier for example, will receive the £100 via the AFP Alternative Fund which will be provided by a designated body. We will confirm details of the AFP Alternative Fund shortly.

The details of when this payment will be made will be confirmed shortly. The government is committed to delivering this support to customers as fast as possible.

The £100 payment has been calculated to ensure that a typical customer using heating oil does not face a higher rate of growth in their heating costs since last winter, in comparison to those using mains gas who are supported by the Energy Price Guarantee.

The government will continue to monitor the prices of alternative fuels, such as heating oil, and will consider further intervention if required to protect UK households from extraordinary fuel prices.

The AFP will be provided to all customers who use an alternative fuel to mains gas. This includes, for example, heating oil, LPG, coal, and biomass.

If you pay for your energy as part of your rent

Your landlord will benefit from the Energy Price Guarantee if they have a domestic electricity and/or gas contract with a licensed electricity and/or gas supplier and should reflect this in the price they charge you from 1 October. Similarly, they will receive the Energy Bills Support Scheme and should pass it on to you. We will act now to introduce legislation to ensure this happens.

Your landlord should pass on the discount irrespective of how you pay for your energy use. If they charge you based on your usage, they must do this at the same price as they pay, including the Energy Price Guarantee (see Ofgem’s guidance on ensuring customers are being charged no more than they should). If, on the other hand, you pay an “all inclusive” rent incorporating a fixed charge for energy use, your landlord should pass the Energy Price Guarantee and Energy Bills Support Scheme benefits to you if provided for in your tenancy agreement.

If your landlord has a non-domestic contract, they may benefit from the Energy Bill Relief Scheme depending on when they signed the contract. If so, they should pass the savings on to you.

How the Energy Price Guarantee and Energy Bills Support Scheme will be applied to energy bills in Northern Ireland

For customers in Northern Ireland, both the Energy Price Guarantee and Energy Bills Support Scheme will work very similarly to those in Great Britain, as described above and householders will receive an equivalent level of support. There will be some ways in which the schemes will operate a little differently, because of the different way the electricity and gas markets operate. The schemes will operate as described in the sections above other than the differences set out in this section.

For the Energy Price Guarantee, the scheme will still work through your electricity and gas bills. There is no need to apply or contact your energy supplier. As the scheme is being introduced from 1 November in Northern Ireland, you will also receive backdated support to cover for October 2022 to ensure Northern Ireland households receive an equivalent level of support to households in Great Britain. This backdated support will increase the discount you receive. Therefore, your energy supplier will reduce your energy bills by a unit price reduction of up to 19.9p/kWh for electricity and 4.8p/kWh for gas.

For pre-payment meter customers in Northern Ireland, the Energy Price Guarantee will be applied to the rate you pay for each unit of energy at the same rate as for all other customers (19.9p/kWh for electricity and 4.8p/kWh for gas), so the money you put on the meter will last longer than would otherwise have been the case this winter.

The Energy Price Guarantee limits the amount you can be charged per unit of gas or electricity, so your exact bill amount will continue to be influenced by how much energy you use.

Households in Northern Ireland will also receive a £400 discount on their energy bills through the Northern Ireland Energy Bills Support Scheme (NI EBSS) this winter.

This offers the same level of support as households in Great Britain are receiving under the Energy Bill Support Scheme (EBSS). We are working at pace to deliver a solution which accounts for the Northern Ireland market and to provide the support as soon as possible this winter.

The government will deliver a one-off £100 payment to UK households who are not on the mains gas grid and therefore use alternative fuels, like heating oil, to heat their homes. The government is working with electricity suppliers to explore how the payment could be delivered via electricity bills, under a similar delivery model to EBSS. An alternative fund will also ensure that those households who are eligible for but who do not receive AFP because they do not have a relationship with an electricity supplier for example, will still receive the £100 from a designated body. The timing will be decided shortly.

Support for businesses and non-domestic properties

Providing support to businesses

Businesses and other non-domestic customers like charities, schools and hospitals, do not benefit from the Ofgem price cap and are not able to access the kind of support we are making available to households, but are still experiencing increasingly high energy bills.

A new 6 month scheme for businesses and other non-domestic energy users has therefore been announced, which will offer comparable support as is being provided for domestic consumers.

After this initial 6 month scheme, the government will provide ongoing focused support for vulnerable industries.

There will be a review in 3 months’ time to consider where this should be targeted to make sure those most in need get support.

Find out more about the Energy Bill Relief Scheme.

Reform to address long-term issues in the UK’s energy sector

Reducing the cost

While the intervention will be funded by the government, action is being taken to significantly reduce the cost over time, including:

Energy Supply Taskforce

A new Energy Supply Taskforce – led by Madelaine McTernan who headed up the UK’s successful Vaccine Taskforce – has begun negotiations with domestic and international suppliers to agree long-term contracts that reduce the price they charge for energy and increase the security of its supply. The government will negotiate with renewable producers to reduce the prices they charge as well.

Energy Markets Financing Scheme

HM Treasury are announcing a joint scheme, working with the Bank of England, to address the extraordinary liquidity requirements faced by energy firms operating in UK wholesale gas and electricity markets. The Energy Markets Financing Scheme will enable stability to both energy and financial markets, and the economy, and reduce the eventual cost for businesses and consumers. The scheme will provide short term financial support and will be designed to be used as a last resort.

Increasing supply

Learning from the mistakes of the past, the government is taking action to accelerate domestic energy supply, increase our energy resilience and achieve our ambition to make the UK an energy exporter by 2040:

• launch a new oil and gas licensing round, expected to lead to over 100 new licences.
• lift the moratorium on UK shale gas production – enabling developers to seek planning permission where there is local support, which could get gas flowing in as soon as 6 months
• drive forward the acceleration of new sources of energy supply from North Sea oil and gas to clean energy like nuclear, wind and solar
• continue progressing up to 24GW of nuclear by 2050, with Great British Nuclear helping to set direction of getting new nuclear projects online in the UK
• undertake fundamental reforms to the structure and regulation of energy market through recommendations from a new review of the UK energy regulation
• launch a review to ensure we are meeting our net zero 2050 target in an economically-efficient way, given the altered economic landscape; chaired by Chris Skidmore MP and reporting by the end of this year, it will ensure delivering the target is not placing undue burdens on businesses or consumers

Other help

Find out what other payments are available that can help with your energy bills.

 

(GOV.UK)

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Story originally appeared on fca.org.uk