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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?
(7 days later)
Typical household energy bills are being capped by the government at £2,500 a year from 1 October, in an effort to limit soaring energy costs. Households are being advised to take energy meter readings before prices rise on 1 October.
The government has also announced plans to help businesses, charities and places like schools and hospitals deal with heating costs this winter. From that date, typical annual domestic energy bills will rise to £2,500. Bills for businesses are also changing.
What is the energy plan for households? Why should you take a meter reading?
The measures to help households include: On 1 October, the annual energy bill for a typical household will rise from £1,971 to £2,500 - a 27% increase.
a typical household's energy bill will rise to £2,500 a year from 1 October (from £1,971) Submitting accurate meter readings means providers won't accidentally charge you at the higher rate for your earlier energy use.
the "energy price guarantee" will last two years Energy UK, representing suppliers, said most firms will accept readings for a few days either side of 1 October.
this is not a limit on how much you will pay - your bill depends on how much energy you actually use Why are prices going up?
before the announcement, typical household bills had been due to rise to £3,549 a year Energy costs have soared because the conflict in Ukraine has reduced supplies of Russian gas. Prices have also risen because demand for energy has rocketed since Covid restrictions ended.
the plan applies to all households in England, Scotland and Wales; the "same level of support" will be available in Northern Ireland These price increases are now being passed on to customers through an increase to the energy price cap.
the one-off £400 fuel bill discount payments for households will go ahead This sets the highest amount suppliers are allowed to charge domestic households for each unit of energy they use.
anyone who doesn't use mains gas and electricity - such as those using heating oil - will receive an extra £100 on top of the £400 discount.
How will the energy price guarantee work?
The energy price guarantee replaces the existing energy price cap, which sets the the highest amount suppliers are allowed to charge domestic households for every unit of energy they use.
These energy units are the kilowatt hours (kWh) shown on bills.These energy units are the kilowatt hours (kWh) shown on bills.
From 1 October, dual-fuel customers on a standard variable tariff will pay: Dual-fuel customers on a standard variable tariff who pay by direct debit will now be charged a maximum of:
34p per kWh of electricity 34p per kWh of electricity (currently 28p)
10.3p per kWh of gas 10.3p per kWh of gas (currently 7p)
On this basis, a typical household can expect to pay about £2,500 a year. The energy price cap also sets the standing charge for being connected to the grid. This will be 46p per day for electricity and 28p per day for gas, up from 45p and 27p respectively now.
But most households aren't actually typical. Many factors - like the number of people in a house, the type of property it is, and how much heating and power they use - all make a difference. How much will I pay?
The government has said many people on fixed deals will also receive a discount. However, those on an expensive fixed tariff could still end up paying more than those on a standard variable tariff. The government says a typical household can expect to pay £2,500 a year. Average household bills had been expected to rise to £3,549 a year before the government set the new maximum charges.
The standing charge - the fee customers pay for being connected to the energy grid - will be 46p per day for electricity and 28p per day for gas. However, most households aren't typical, and your bill depends on how much energy you actually use.
What cost-of-living payments will I get? Things like the number of occupants, the type of property and how energy efficient it is all make a difference.
What can I do if I can't pay my energy bill? The government said the £2,500 cap will be in place for two years.
Ofgem: Getting help if you can't afford your energy bills The price guarantee applies to all households in England, Scotland and Wales, with the "same level of support" available in Northern Ireland.
Many people on fixed deals will also benefit. However, those on expensive fixed tariffs could still end up paying more than those on standard variable deals.
The government said its energy guarantee would cost £60bn for the first six months. However, industry analysis suggests the total bill could be between £130bn and £150bn.
The cost will be met by an increase in government borrowing, but the likely cost of this has soared after financial markets reacted badly to the chancellor's plans to introduce tax cuts worth £45bn.
Where does the government borrow billions from?
What help will businesses get with bills?What help will businesses get with bills?
Under the Energy Bill Relief Scheme: Business customers weren't previously covered by the energy cap.
wholesale energy prices will be capped for all organisations for six months from 1 October Under the government's energy bill relief scheme:
prices will be fixed at 21.1p per kilowatt hours (kWh) for electricity and 7.5p per KWh for gas wholesale energy prices will be capped for firms and organisations for six months from 1 October
the government says this represents less than half the wholesale prices which had been expected this winter prices will be fixed at 21.1p per kWh for electricity and 7.5p per KWh for gas
at present, firms aren't covered by an energy price cap in the way that households are the government says this is less than half the wholesale prices expected this winter
organisations already on a fixed price contract will be eligible for the scheme, as long as the deal started after 1 April 2022 organisations on fixed price contracts will be eligible if their deal started after 1 April 2022
those on variable tariffs will receive an automatic discount for each unit of energy usedthose on variable tariffs will receive an automatic discount for each unit of energy used
the savings will begin to appear in November's bills (backdated to October) and will be applied automaticallythe savings will begin to appear in November's bills (backdated to October) and will be applied automatically
a review will be published in three months' time to identify "vulnerable" organisations that will need further support after March 2023 a review will be published in three months' time to identify "vulnerable" organisations needing support after March 2023
The scheme will apply to all non-domestic energy customers in England, Scotland and Wales. The scheme will apply to all non-domestic energy customers in England, Scotland and Wales, with a parallel scheme in Northern Ireland.
A parallel scheme, based on the same criteria and offering equivalent support, will be established in Northern Ireland. What other help can I get with my bills?
Energy bills could break firms, warns ex-chancellor All households are automatically getting a one-off £400 discount on their fuel bills from October. Customers have been warned not to fall for scams requesting personal details in order to get the reduction.
How much will the energy guarantees cost and who will pay for it? Eight million low-income households who receive certain benefits or tax credits will also receive £650.
The government said its energy package will cost £60bn for the six months from October. Pensioner households will receive £300 and some disabled people will get £150.
It will be paid for through increased borrowing. This is when the government raises money by selling financial products called bonds, which have to be paid back, usually after several years, with interest. This help is being partly funded by a temporary windfall tax on oil and gas companies.
This means taxpayers ultimately pay back more than the government raised. In addition, vulnerable families can claim help through the Household Support Fund, and the Warm Home Discount scheme.
Where does the government borrow billions from? Energy companies also run hardship funds, although the regulator Ofgem warned that most firms need to do do more to help customers who are struggling.
What additional help will I get to pay my energy bills? What can I do if I can't pay my energy bill?
All households will be given a one-off £400 discount on their fuel bills from October. Ofgem: Getting help if you can't afford your energy bills
In addition, £650 will be paid to more than eight million low-income households who receive many benefits or tax credits.
Further payments of £300 to pensioner households and £150 to disabled people will also go ahead.
Vulnerable families can also claim help through the Household Support Fund, the Warm Home Discount scheme, and hardship funds run by energy companies.