HomeBBC NEWSBusinessWhat is the energy price cap and how high could bills go?

    What is the energy price cap and how high could bills go?


    Prime Minister Liz Truss has announced additional support to limit the rise in energy costs.

    What is the energy plan?

    Under the measures.

    From 1 October, a typical household’s energy bill will increase to £2,500 per year (from £1,971)
    “The Energy Price Guarantee will last for two years
    It’s not a limit to how much you’ll pay – your bill depends on the amount of energy you actually use
    The typical household bill will rise to £3,549 per year before it is announced
    The scheme is available to all households in England, Scotland and Wales. In Northern Ireland, the “same level of support” will be provided
    A one-off fuel bill discount of £400 to households will continue
    Anyone who does not use gas and electricity – such as those using heating oil – will receive the same level of help
    Businesses will initially be protected for six months

    What is the energy cap and how does it work?

    The Energy Price Guarantee will replace the existing energy cap, which sets the maximum amount a supplier is allowed to charge a household for each unit of energy it uses.

    These units of energy are the kilowatt hours (kWh) on your bill.

    With the new price guarantee, a typical household can now expect to pay around £2,500 per year. This is based on a household using 12,000 kWh of gas and 2,900 kWh of electricity per year.

    But most households are not actually typical. Many factors – such as the number of people in the house, the type of property and how much heating they use – all have an impact.

    As a result, large energy users will pay more than £2,500, while those who use less energy will pay less.

    From 1 October, dual-fuel customers on the standard variable tariff will pay

    34p per kilowatt hour
    10.3p per kWh of gas
    The government says that many people on fixed deals will receive a discount equivalent to the support given to the price cap. However, anyone who chooses the expensive fixed tariff will end up paying more than the standard variable tariff – even after the discount.

    Fixed tariffs – what customers pay to connect to the energy grid – will be limited to 46 pence a day for electricity and 28 pence a day for gas.

    Graphic showing how the energy cap has changed over time

    How much will the energy guarantee cost and who will pay for it?

    The government has said it will set out the full cost of the scheme later in September, but estimates are that it could be between £130bn and £150bn.

    It has confirmed that it will cover this cost through increased borrowing: this is when the government raises money by selling financial products called bonds to international investors, such as pension funds. These bonds usually have to be repaid after a few years, along with interest. This means that taxpayers end up paying more than the amount raised.

    What help will businesses get with bills?

    Businesses, charities, schools and other organizations will also be helped.

    Currently, these are not covered by the energy price cap in the same way as households.

    The government says they will now receive a six-month “parity guarantee” on energy prices.

    After six months, “vulnerable” businesses – including pubs – will receive further support.

    A review will be conducted after three months to determine the target for additional support.

    What additional help will I get to pay my energy bills?

    As previously announced, all households will receive a one-off discount of £400 on their fuel bills from October.

    In addition, £650 will be paid to over 8 million low income households who receive many benefits or tax credits.

    Payments of £300 will also continue to be made to households receiving pensions and £150 to disabled people.

    The government hasn’t said whether these will be repeated next October.

    Image caption,Fifty disability charities have called on the government to offer more support

    Vulnerable families can also apply for help through the Family Support Fund, the Warm Home Discount Program and the Hardship Fund operated by the energy companies.

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