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What is the energy price cap and how high could bills go? What is the energy price cap and how high could bills go?
(1 day later)
The new prime minister, Liz Truss, has promised to take action on rising energy bills. The details are still to be confirmed. Extra support to limit the rise in energy bills has been announced by Prime Minister Liz Truss.
At present, energy bills for a typical household are due to soar when a new price cap is introduced next month. What is the energy plan?
What is the government doing about energy bills? Under the measures:
Right now, the annual energy bill for a typical household is £1,971. From 1 October, however, that's due to rise 80% - to £3,549. A typical household's energy bill will rise to £2,500 a year from 1 October (from £1,971)
On Thursday, Ms Truss will announce plans to limit the October increase. The "energy price guarantee" will last for two years
It's understood that the plans will see a typical bill rise to £2,500 instead. That's about £1,000 less than expected, but still about £500 more than at present. This is not a limit on how much you will pay - your bill depends on how much energy you actually use
As well as households, businesses are also expected to receive some help. Many firms are currently facing even sharper rises than households. Before the announcement, typical household bills had been due to rise to £3,549 a year
To limit the amount customers' bills increase by, energy companies will be able to access government-backed loans. The plan applies to all households in England, Scotland and Wales. In Northern Ireland, the "same level of support" will be available
The government is expected to fund the measures by borrowing about £100bn. However, the final bill will depend on the cost of energy on the international markets. The one-off £400 fuel bill discount payments for households will go ahead
What is the energy price cap? Anyone that doesn't use mains gas and electricity - such as those using heating oil - will also receive equivalent help
The energy price cap sets out the maximum amount energy companies are allowed to charge households for each unit of energy they use (the kilowatt hour or kWh on your bills). Businesses will be protected for six months initially
What is the energy cap and how does it work?
The energy price guarantee will replace the existing energy cap, which sets the the highest amount suppliers are allowed to charge households for every unit of energy they use.
These energy units are the kilowatt hours (kWh) on your bills.
Under the new price guarantee, a typical household can now expect to pay about £2,500 a year.
However, most households aren't actually typical. Many factors like the number of people in a house, the type of property and how much they use their heating all make a difference.
So, big energy users will pay more than £2,500, and people who use less energy will pay less.
The cap also limits the standing charge - the fee customers pay for being connected to the energy grid.The cap also limits the standing charge - the fee customers pay for being connected to the energy grid.
The increase in bills to £3,549 - or £2,500 as is now expected - is not a limit on the amount households will actually pay for their energy. Instead, it is an estimate of what a typical household would pay after the price cap changes. How much will the energy guarantee cost and who will pay for it?
Big energy users would pay more, and people who use less energy would pay less. The government says it will set out the full cost of the scheme later in September, but estimates suggest it could be between £130bn-£150bn.
Ofgem, the energy regulator, sets the price cap according to how much energy companies themselves have to pay for the electricity and gas which they supply to households. From October it is due to update the energy price cap every three months for England, Scotland and Wales. It has confirmed it will be paid for through increased borrowing.
There's no energy cap in Northern Ireland. Bills there have also increased sharply - but not by as much as the rest of the UK. The Utility Regulator says the typical household in Belfast or the west of Northern Ireland will now have an annual bill of about £2,500. This is when the government raises money by selling financial products called bonds to international investors - like pension funds. These bonds have to be paid back, usually after several years, with interest. This means taxpayers ultimately pay more than the amount raised.
Ofgem: Check if the energy price cap affects you Where does the government borrow billions from?
Seven ideas to combat high energy costs What help will businesses get with bills?
Why are energy prices so high? Businesses, charities, schools and other organisations will also receive help.
Energy prices rose sharply when lockdown lifted and the economy began to return to normal. At present, these aren't covered by an energy price cap in the way that households are.
They have also increased because Russia has sharply cut its supplies of gas to Europe. The government says they will now get an "equivalent guarantee" on energy prices for six months.
This has pushed up the price of gas across the continent, including in the UK. After six months, "vulnerable" businesses - including pubs - will receive further support.
Gas and electricity producers raised their prices so rapidly in 2021 that many energy suppliers collapsed. In three months' time a review will be carried out to identify where the extra support should be targeted.
Ofgem has been increasing the price cap to try and ensure the remainder stay in business. What additional help will I get to pay my energy bills?
What's the effect on customers? All households will be given a one-off £400 discount on their fuel bills from October, as previously announced.
The expected energy price rises are expected to put many people into fuel poverty, meaning they can't afford to keep their homes at an adequate temperature. In addition, £650 will be paid to more than eight million low-income households who receive many benefits or tax credits.
Energy company E.on UK suggests one in eight households are currently struggling to pay their bills. It says that could rise to 40% by October if the new energy price cap kicks in. Further payments of £300 to pensioner households and £150 to disabled people will also go ahead.
The NHS has warned that growing numbers of people will see their health worsen, unless the government takes action. The government hasn't said whether these will be repeated next October.
The NHS Confederation said many people will have to choose between skipping meals or heating their homes. Fifty disability charities have called on the government to offer more support
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Worried about energy bills? The BBC's Colletta Smith tells you - in a minute - about four discounts and payments that could help
Worried about energy bills? The BBC's Colletta Smith tells you - in a minute - about four discounts and payments that could help
What help will I get to pay my energy bills?
The government announced that all UK households will be given a one-off £400 discount on their fuel bills from October.
In addition, £650 will be paid to more than eight million low-income households who receive benefits or tax credits.
There are further payments of £300 to pensioner households and £150 to disabled people.
Fifty disability charities have called on Tory leadership rivals Liz Truss and Rishi Sunak to promise more support
Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.
How do I get the £400 energy grant and £650 cost-of-living payment? What cost-of-living payments will I get?
What can I do if I can't pay my energy bill?
Ofgem: Getting help if you can't afford your energy billsOfgem: Getting help if you can't afford your energy bills
What happens if I don't pay my energy bills?
Your supplier must give you a chance to clear your debt through an agreed payment plan.
If you don't agree, the supplier may make you move to a pre-payment meter.
In extreme cases, you might be threatened with disconnection.
What can I do if I can't afford my energy bill?
How are you preparing for the rise in energy bills and cost of living? You can get in touch by emailing: haveyoursay@bbc.co.uk.How are you preparing for the rise in energy bills and cost of living? You can get in touch by emailing: haveyoursay@bbc.co.uk.
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