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Version 26 | Version 27 |
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What is the energy cap and why are energy prices going up? | |
(2 days later) | |
All UK households will receive a £400 discount on their fuel bills in October. | |
The government announced the plan as part of a £15bn package of measures to help with steep rises in energy costs. | |
It will be partly funded by a temporary 25% tax on the profits of oil and gas companies. | |
What's been announced? | |
Chancellor Rishi Sunak told MPs one-off payments will be made to the most vulnerable members of society: | |
people on the lowest incomes who receive help through the welfare system will get £650, to be paid directly into their bank account in two instalments | |
pensioner households who receive the winter fuel payment will get £300 | |
disabled people will receive £150 (plus the £650 payment if they also qualify for that) | |
All households in England, Wales and Scotland will also be given a one-off discount of £400 on their fuel bills in October. This replaces a previous plan to take £200 off bills, which would have had to be repaid over five years. | |
So in theory, a low-income pensioner who has a disability could get a £1,500 package this winter. | |
The government says it will deliver equivalent support to people in Northern Ireland, which has a separate energy market. | |
UK households to get energy bill discounts of £400 | |
How would a windfall tax on energy firms work? | How would a windfall tax on energy firms work? |
How fast are energy bills rising? | |
The maximum price which suppliers can charge customers in England, Scotland and Wales is called the energy price cap. | |
At the beginning of April, the price cap rose from £1,277 to £1,971 per year (for pre-payment customers it increased from £1,309 to £2,017). | |
The chief executive of the UK energy watchdog, Ofgem, has said that the energy price cap could rise to about £2,800 from October, when it is next reviewed. | |
Why is the energy price cap rising so much? | |
The energy price cap is based on the wholesale cost of gas and electricity - in other words, the price that energy suppliers pay producers. | |
This has been rising sharply over the past year, firstly, because the global demand for gas increased very quickly after the pandemic eased, and secondly because the war in Ukraine has threatened supplies from Russia. | |
The price cap is designed to protect consumers from short-term changes in prices - currently it is only adjusted every six months (although Ofgem now wants to reduce this to three months). | |
The cap means that energy suppliers were not able to pass higher costs on to customers for several months. A number of companies went out of business as a result, and most suppliers stopped offering cheap deals to attract new customers. | |
The price cap doesn't apply in Northern Ireland, but households there are also seeing bills rise. | The price cap doesn't apply in Northern Ireland, but households there are also seeing bills rise. |
What's been the effect on customers? | |
There have been warnings that UK households are facing a "cost of living catastrophe". | |
The cost of fuel is one of the main factors which has driven the UK inflation rate up to 9% - its highest for 40 years. | |
Why are prices rising so quickly? | |
Four things that are going up in price and why | |
There have also been several warnings that many households face what's called fuel poverty - this is when a household has to spend a high proportion of its income on energy bills. | |
The chief executive E.On, one of the UK's biggest energy suppliers, warned recently that up to 40% of customers could be in fuel poverty by the autumn. | |
Michael Lewis said that about one in eight of the company's customers were already struggling to pay their bills, even before last winter. | |
What other help is available? | |
The government also announced that it will double the Household Support Fund to £500m. This money is given to local authorities in England to support vulnerable families. | |
Households in England have already been given a £150 council tax rebate to cope with the rise in fuel prices, if their homes are in bands A-D. Similar schemes are in place in Wales and Scotland. | |
English councils also have access to a "discretionary fund" for extra payments, including to people living in other council tax bands. | English councils also have access to a "discretionary fund" for extra payments, including to people living in other council tax bands. |
In Northern Ireland, where there is no council tax system, the government has been given money to make payments, but political uncertainty has meant the cash hasn't yet been released. | In Northern Ireland, where there is no council tax system, the government has been given money to make payments, but political uncertainty has meant the cash hasn't yet been released. |
Confusion over council tax rebate timing | Confusion over council tax rebate timing |
Poorest could miss out on £150 council tax rebate | Poorest could miss out on £150 council tax rebate |
Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March. | Eligibility is also being expanded for the Warm Home Discount, which offers low income households a £150 one-off annual discount on their electricity bill between October and March. |
All the big energy firms have hardship funds, and customers can also get advice from organisations such as Citizens Advice, Turn2Us or the StepChange debt charity. | All the big energy firms have hardship funds, and customers can also get advice from organisations such as Citizens Advice, Turn2Us or the StepChange debt charity. |
What can I do to save on fuel costs? | What can I do to save on fuel costs? |
At the moment, fuel providers are not generally trying to tempt new customers with cheap offers, although a few firms, including British Gas and EDF, are offering new fixed price deals to some existing customers, which may be worth considering. | At the moment, fuel providers are not generally trying to tempt new customers with cheap offers, although a few firms, including British Gas and EDF, are offering new fixed price deals to some existing customers, which may be worth considering. |
People who are already on fixed deals are advised to stay put. | People who are already on fixed deals are advised to stay put. |
Otherwise, households are being encouraged to save money by improving energy efficiency. | Otherwise, households are being encouraged to save money by improving energy efficiency. |
The Energy Saving Trust says several small changes could help many people off-set some of the recent rises in energy costs. | The Energy Saving Trust says several small changes could help many people off-set some of the recent rises in energy costs. |
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